e-book - Gupea - Göteborgs universitet

Handelshögskolan vid Göteborgs Universitet/Juridiska InstitutionenUppsats 20p: Tillämpade studier påProgrammet för Juris kandidatexamen

Författare: Anders V KvistHandledare: Filip Bladini

Work group:Management of IT-structures:

e-bookA study of law management issues, launching

a new product within the IT-sphere

Anders V Kvist Page 2 02-09-19

Table of Contents

Abbreviations

1. Introduction

1.1. Setting

1.2. Purpose

1.3. Methodology

1.4. Implementing The Law Management ModelOn Relevant e-Book Structures

1.4.1. Product Structure

1.4.2. Market Structure

1.4.3. Business Structure

2. The E-book (Product Structure)

2.1. History

2.2. Product Presentation

2.3. General development

2.4. Different Technology Solutions

2.4.1. Hardware

2.4.2. Software

2.5. Proprietary Rights Concerning the E-book

2.5.1. Patent

2.5.2. Copyright

2.5.3. Trademark

2.6. Standardisation Issues

3. Drawing up a new Market (Market Structure)

3.1. Project on E-books

3.1.1. School of Economics and Commercial Law

3.1.2. City Library of Stockholm

3.2. Current Market

3.3. Future Market, a Scenario

3.3.1. Initiating the Market

3.3.2. Market Target Groups

3.3.3. Distribution and Marketing

4. The Actors (Business Structure)

4.1. The Actors

4.2. Co-operation


4.3. Differences Between the Traditional and the Electronic PublishingBusiness Structures

4.3.1. Real changes

4.3.2. Possible changes

5. Strategic Law Management Issues

5.1. Introduction

5.2. Launching the e-Book Concept in Sweden

5.3. Technology and Standards

5.3.1. Technology Solutions

5.3.2. An Outline on Strategic Standardisation Issues

5.4. Information Technology Law

5.4.1. An introduction

5.4.2. Intellectual Property Rights

5.4.2.1. Copyright

5.4.2.2. Patent

5.4.2.3. Trademark

5.4.3. Contracting, the International Perspective of the Internet

5.4.3.1. National Contract Law

5.4.3.2. International Contract Law

5.4.4. Electronic Commerce

5.4.4.1. Legal Aspects on Marketing

5.4.4.2. Distribution and the Security Measures

5.4.4.3. Consumer/Customer protection

5.5. Business Performance Issues

5.5.1. E-commerce of Intellectual Property, An Uncertain Business

5.5.2. Economic Aspects on the Sale of IP Goods and Services

5.5.3. Proposals of Strategic Action Plans

6. Summary

List of References


Abbreviations

Equipment, technologye-book, Electronic Booke-reader, Electronic Book ReaderPDA, Personal Digital AssistantDOI, Digital Object IdentifierPC, Personal ComputerCPU, Central Processing UnitDSP, Digital Sound ProcessorUSB, Universal Serial BusLCD, Liquid Crystal DisplayDpi, Dots Per InchOS, Operative SystemWWW or Web, World Wide WebHTML, Hyper Text Mark-up LanguageISP, Internet Service ProviderMP3, Moving Pictures Experts Group, Layer 3PDF, Portfolio Document FormatTCP/IP, Transmission Control Protocol/Internet Protocol

Commercial- and Legal TerminologyIP, Intellectual PropertyIPR, Intellectual Property RightsICM, Intellectual Capital ManagementIT, Information TechnologyR&D, Research and DevelopmentCRM, Customer Relation Management

Conventions, LegislationPC, Paris Convention, Industrial Intellectual Property Protection (1883)BC, Bern Convention, Protection of Literary and Artistic Creations (1886)WC, World Convention on Copyright, (1952)WCT, WIPO Copyright Treaty (1996)WPPT, WIPO Performances and Phonogram Treaty (1996)TRIPs, Trade Related Intellectual Property Aspects (1994)CISG, UN Convention on Contracts for the International Sale of Goods, (1980)TBT, WTA/WTO Agreement on Technical Barriers on TradeVML, Varumärkeslagen (SFSFirmL, Firmalagen, (SFSURL, Upphovsrättslagen, (SFS 1960:729)DMCA, US Digital Millennium Copyright Act (1998)PL, PatentlagenEPL, Europe Patent LawPCT, Patent Co-operation TreatyAvtL, Avtalslagen (SFS 1915:218)KöpL, Köplagen (SFS 1990:931)KKöpL, Konsumentköplagen (SFS 1990:932)IKL, lag om Internationella avtal om köpUDPR, The Uniform Domain Name Dispute Resolution PolicyDNS, Domain Name System

Organisations, AuthoritiesWTO, World Trade OrganisationWIPO, World Intellectual Property OrganisationUNCITRAL, United Nations Commission on International Trade LawUN, United NationsEU, European UnionEPO, European Patent OrganisationPRV, Patent och RegistreringsverketNIST, National Institute for Standardisation and TechnologyNIC-SE, Network Information Centre Sweden ABEBX, Electronic Book Exchange Working GroupISO, International Standardisation OrganisationOEB, Open e-book OrganisationSRS, Swedish Standards CouncilCEN, The European Committee for StandardisationNCITS, National Committee for Information Technology StandardsETSI, European Telecommunications Standards InstituteITS, Information Technology StandardisationSIS, Swedish Standards Institute


1. Introduction

1.1. Abstract

Information technology has come to stay as it rightly used would bring

benefits like increased market shares, enhanced quality and higher profits

for the user.1 Modern IT has the ability to simplify ongoing processes of

development in today’s society, which in particular in the IT area itself are

explosive. This has brought a need of effective management for enterprises

with connections to IT, almost every single business actor today that is, to

coop with the new possibilities but also the risks IT brings up. Management

not only from an ordinary view but also in a law management perspective2,

because the field on the whole is previously unregulated, as it is a new one

and withholds several legal issues of significant weight for the future IT-

society.

Law management provides for the business performer to take the right

decisions in respect of matters linked to the legal infrastructure of the

business. Furthermore it has to give guidelines when it comes to legal

matters as for example intellectual property rights, marketing laws and

competition regulations in respect of the product and market areas where

the businessman or -woman is or in the future are going to be active.

The accomplishment in this essay is an addition to a workgroup called

Management of IT-structures3 with the purpose of giving a contribution to the

discussion of certain problem areas within the IT sector. To be more specific

about this paper, it will highlight the need of certain important

considerations and decisions to be made when putting forward a new

product within the IT sphere. It will also provide a background and a

presentation of the actual product.

The targeted product is a type of information bearer, which might

revolutionise the way we read books, newspapers and other printed

information sources, the electronic book. It contains of two different parts:

First, the hardware called electronic book reader or as in the following, e-

reader. Second, the electronic content, the text to read, stored in a data file

format called electronic book or preferable e-book, visualised on the e-reader

1 Ulf Arnetz, ”Strategisk IT” p. 172 Law management perspective is briefly described under the headline Methodology


or if formatted for it, any computer. To avoid confusion and mix-ups I have

adopted solely the distinguished names given above, e-reader and e-book.4

I find it suitable to start up with an explanation of the purpose of this essay

and then introduce a model, which will illustrate the legal (and other) issues

of managerial character and their relation towards each other’s. In the next

step I will attempt to use the model on the e-book concept. Finally I am

specifying and discussing some legal areas of strategic importance.

1.2. Purpose

The aim of this study is to introduce the e-book concept as a commercial

product. The work will highlight certain issues that are strategically

interesting from a law management viewpoint for a publisher entering the

business. The matters must, to delimit the work, therewith be selected with

the presence of eventual legislative work, standards formation, future IT

solutions and consumer demands in mind. But also with regards of how to

manage the intellectual properties, which mainly concerns copyrights, in

order to cover investments and avoid losing control over one’s immaterial

assets.

It all comes down to the main purpose, which is to give some guidelines for

the publisher or other interests having thoughts of commercialising the e-

book idea.

1.3. Methodology

What is the law management perspective about? Traditionally the lawyer is a

conflict solver that tries to sort out problems along the way, not an origin of

strategic knowledge. A source that might give less legal implications such as

legal processes descended from inter alia disputes with competitors,

customers, authorities, employees’ or even third parties claiming proprietary

rights to a product of yours. The law management idea is on the contrary

concentrating upon the necessary considerations one have to do before going

into business or before any action is taken. It offers an approach to business

performance in respect of the economic interests, that will make you do

things right from the start to avoid, as in the example above, costly and

discrediting disputes. As well as for example the technology-, marketing- and

3 Workgroup formed by an assembly of final term law students at the School of Economics and Commercial

Law, Gothenburg, autumn 19994 Names proposed by eBookNet at http://www.ebooknet.com/, (10 august 1999)


financial management the law management should provide solutions and

guidelines of strategic quality to improve the business performance, enlarge

profits etc.

Strategic considerations have become more important today, why? Could it

be the flourishing technology progress and the wrought-up speed of news

and information sent trough the ether and the cyberspace. Today’s

technology will be old and outmoded tomorrow. IT is an area where this is

truer than most other fields. The rapid progress calls for research work

regarding future developments. Not to forget the important awareness about

future IT legislation to come, which might influence the e-book business.

Drawing up business strategies is much of an attempt to shape a well

working enterprise or to enhance business performances, in accordance to a

vision. Further on it could be how to, at the best, handle preferences and

interests and make correct valuations of these or, from another view,

attempt to explain the legal infrastructure of a product, market or business.

That is which rules and/or regulations will affect the state of business, in

which direction these will affect the business and how to handle it. Moreover

strategies will be an important derivation to legitimate action taken by the

business performer.

When going into business several issues has to be regarded. Using a general

model can eliminate the risk of forgetting any important consideration. The

law management model on page 8 is sketched out for the purpose of finding

out which considerations a publisher has to do, when commercialising the e-

book concept in Sweden. This work is divided in two principal parts. First

comes a part that presents the structural themes of the model, which is the

product-, market- and business structures, in a somewhat empirical study

briefly described hereunder.

I will start up with a brief look on the history behind the product. Then the

present product appearance and the most important R&D within the field

are recapitulated. The product itself is to be protected by a system of

proprietary rights spanning from copyright and trademarks to patents. But

there are also technology solutions and contractual measures giving cover.

These elements are to be examined in this work.

Another matter that has shown to be of importance, especially to new


consumer orientated products, is the eventual lack of compatibility between

different systems on the market. The solution is creation of a common

standard. Awareness of standardisation issues is important for the e-book

business as well as the IT branch as a whole.

We have in the year of 2001 been seeing the first steps establishing a

Swedish e-book market, but are there a real market potential in Sweden?

The marketplace is ready for e-books but it is rather unique, as the Internet

is able not only to bring the parties together but also to provide for the

distribution and the payment transaction in an all automated process. This

is the case for e-books and gives the branch interesting economics.

We will finally view a comparison between the traditional publishing industry

to the e-book business, in order to visualise the great changes in the

business structure to come. Matters concerning the business structure have

however a wider scope and can therefore not be more than briefly described

in this work.

The second part in this work has an ambition to explain the essence of

certain legal and to some extent commercial issues, which will influence an

e-book market and follow up the empirical study. Besides an effort to explain

which strategic considerations could be necessary is to be found in this part.

The purpose is here to gather relevant information to launch some

conclusions on the commercial strength and weakness in the e-book

concept.


The Law Management Model on IT Structures5

5 The model proposed by Ulf Petrusson at seminar on Management of IT-structures October 1999.

Product structure

Business Structure

Market structure

Hardware SoftwareStandards

Patents Copyright

Data FormatTechnology Strategic

implementation

TechnologyManagement

BusinessCreation

Possibleimplementationof proprietaryrights issues

ITManagement

IPManagement

LegalConcepts/

Management

Identify possibleActors

Propose adequateCo-operation

The Market Place PurchasersManufacturersRetailersDealers

MarketingManagement

Future Markets

SalesManagement

OtherFunctions…


1.4. Implementing the Law Management Model

On E-book Structures

Application of the law management model on relevant e-book structures

according to the general model gives us the following appearance, divided into

three steps: 1) Product structure, 2) Market structure and 3) Business

structure.

1.4.1. Product Structure

In the product structure part, we are introduced to the e-book concept from

different angles as to the historical background, the present performance

and how it might appear, by technology improvements, in the future.

Awareness of these matters is essential when trying to make the right

decisions and to take proper action in order to succeed with a

commercialisation of the e-book idea. The alignment above shows a

simplified picture of subjects, which will be presented under this chapter but

to some extent, mainly the legal matters, more thoroughly under chapter 5.

While trying to obtain the most out of electronic publishing one have to make

some substantial decisions. First, which technologies are going to be seized

in respect of standards on IT, on IP management issues and customer

demands? Second, could any legal regulations be used as tools to achieve

advantages during the steps in the commercialisation act?

Standardisation matters are not easy to get hold of. The fast technology

development making it harder. When a standard finally is settled there are

no guaranties for it to be established. Business actors with strong market

positions may ignore a standard and continue to manufacture or publish

their proprietary product lines. In another scenery the standard can be

E-book, a productpresentation:

1. History2. Development3. Future

Strategic implementation inrespect of different standardsand technologies.

Feasible solutions on legalmatters in accordance to ourjuridical conceptualframework.

e-book: Data format Standards Copyrights

e-reader: Technology Standards Patents


outmoded in a short time.

The question of legal issues is apparently important; how do we approach

the legal topics addressed in a correct practice. Is it really possible to use the

laws as instruments to gain and keep control over the intellectual capital

that the e-book in reality consists of? Or do one have to relay on technology

solutions to protect the proprietary rights, maybe in combination with

contractual agreements like the licensing agreements of computer software.

Technology developments changes the e-book concept constantly and

without knowledge of the R&D within the field of handheld computing

devices it is not possible to get a proper opinion of what format the e-book

should be published in. Two main alternatives are given; there are hardware

e-reader devices or the software e-readers fitted for open OS and network

solutions. In this perspective a brief description of relevant R&D work of

interest for the nearest future in the business are enclosed.

The technology evolution is a matter of genuine high-tech R&D. To design

and manufacture these handheld computing gadgets needs both commercial

strength and great technological knowledge. The use of such technology in

the e-readers devices will be dependent on licensing arrangements or other

forms of joint measures, as current e-book developers and manufacturers on

their own neither has the ability nor the capacity to be in the frontline

technology development.

If summarising the product structure there are three fundamental issues

crystallising before us: Technology solutions and their advance potential,

intellectual property management and finally standardisation matters.


1.4.2. Market Structure

The market structure is highly interesting to study because one can expect

great differences between the traditional book market and the e-book market

both when it comes to the parties involved and to the marketplace final

shape. The changes will take place immediately when publishers put the e-

book on the market but the impact on the traditional book market will not

mean, at least for a period of 3-8 years, a serious threat.6 The market

structure will be examined under chapter 3.

The e-book is part of and a child of our modern IT society. The concept may

now be possible to realise not only as a result of the technology

improvements concerning the hardware but also as the Internet provides a

smart but also necessary marketplace for the e-book. The idea of immediate

and inexhaustible sources of literary works is depending on the deliverance

via the Internet or any similar network. The infrastructure of the Internet

has become maturer and e-commerce has being established and is now

about to be generally accepted. We’ll see how the future developments may

strengthen the idea of e-commerce on products and services, which has

various electronic contents based on copyrighted intellectual property,

suitable for deliverance’s via the Internet.

6 According to a common impression from an almost unanimous branch expertise, on the NIST hosted e-book

conference in 1999, www.ebooknet.com, (10 August 1999)

StudentsE-reader

E-book

Manufacturers

Suppliers

Distributors

Authors

Publishers

Schools

OtherConsumers

Professionals

Companies

Distributors

Salesmen

On-lineBookstores

TraditionalBookstores

AlternativeChannels

PublicAuthorities

Anti-Trust Law Marketing LawContract Law Consumer Protection


The e-book commerce is expected to be an all automated process from order

and delivery to payment transaction. The anonymous tendency is built up

and calls for secured delivery systems and payment routines to avoid any

attempt of computer fraud like theft of IP, piracy copying and credit card

misuse etc. These matters are almost purely legal and very important to the

e-book publisher but not significant just for the e-book commerce and will

therefore not be more than briefly reviewed.

In the legal perspective on the market structure besides integrity and

consumer protection, significant weight must be emphasised on marketing-,

competition- and contract law too. The Internet has an impact worldwide

that makes any illegal action in the market perspective grave.

One important issue, besides who the parties with interests in the market

will be, is the one of how to estimate the future market. When doing so a

wide range of matters has to be considered at the risk of faulty prediction:

Technology improvements, society’s social movements, mandatory new

regulations and competitive new IT solutions which brings products out of

date etc.

Will there at all be an interest of the E-book from potential buyers when it

finally hits the market in Sweden? In Sweden some parties, publishers and

bookstores, have recognised the need of co-operation in order to achieve a

flourishing e-book market. The co-operation has nothing but one goal, to

catalyse the e-book market in Sweden.

The market structure withholds a great variety of matters of which we must

pick a couple to study if it should be possible to reasonably delimit the work.

It is my believe that the points where the direct interaction between vendors

and consumers are most important. Therefore we must understand how to

secure the transaction, a contracting view, and also how the rules aiming at

consumer protection are operating.


1.4.3. Business Structure7

The figure above tells us something about the situation that e-book

publishers will face as well as any businesses within the IT sphere. That is

the process of ongoing development. The product is becoming different not

only as a consequence of technology improvements but also by influences

from other sources like for example customer demands and new mandatory

regulations. The same goes for the market, which will change depending on

factors mentioned in the model. The purpose of the business structure

model is to give a basis for the business performer to interact with the

system and to provide solutions with the intention to affect, by effective

management, the input sources at the aim of bringing the product and

market to preferable positions. The reasons are obvious; the business has to

be profitable. This goal is being reached just by providing demanded

products.

If the goal is to control the product and the market developments in order to

be profitable which are the means? The way I see it there are three main

fields of business performance with certain importance, which have to be

considered. First, one has to define the market actors and their strength and

second, which co-operation is thereby necessary (and to which form) and last

drawing up strategies to reach desired managerial effects?

7 Input from the surrounding environment, Ulf Arnetz, Strategisk IT p. 57.

Business Actor

ManagementIssues

Law and regulations

Competitors

Customers

Technology DevelopmentsEconomic Factors

Society’s Social Movements

Market StructureProduct Structure

Input Factors


It is likely that we in the future can divide the market in two separate

product lines, the e-readers and the e-books but not until common

standards is settled. Besides the e-reader devices on the market has not

reached the state of art that is needed to be competitive. The tendency right

now is therefor in general, that companies whom has an interest in the e-

publishing industry is focusing to get e-books accepted and to build up a

market for them, leaving the thought of an e-reader device replacing the

hardcover book, to rest for now.

The e-reader devices will face regular costs of manufacturing and deliveries

etc, while e-book publishers has a chance to gain profits in a greatly cost

reduced business, compared to traditional book publishing that is. When it

comes to e-reader devices a lot of parties are involved. Not so for e-book

publications however, which simply might be an affair between the author

and the publisher alone. So in fact following the above, future e-book

industry will have two groups of actors.

While the business performance is almost all about management

competence there is an explanation why a publisher has to give these issues

a thought and to make some reflections of it, from the law management

perspective.

I will try to point out the supposed actors in the e-book business and

examine the need of co-operation between the single actors or groups of

them in the effort to commercialise the e-book concept.

As one can see in the model on page 8, the structural part goes from

business creation on to business performance sorted in managerial

competence areas. Noticeable is the fact that the business exercise influence

on the product and market structures. Rightly so, I can’t see the point of

creating a business without having a possibility to supervise and govern its

activities.

2. The E-book (Product Structure)

2.1. History

Since a couple of decades there has been a discussion about the paperless

society and if it is in reach. The computer should be the tool in making it a

reality. The screen would replace books, newspapers and other printed


works, but so far the computer has only helped us to produce even more

papers.

In the long run the enormous waist of paper must come to a stop. The more

people we will become on earth the more paper will be consumed. This

means that the woodlands are going to be, in fact they already are, in a

threatened position and that will have a major environmental effect. Not to

mention the detrimental effects from the manufacturing and worldwide

distribution of the printed word.

Why, by the way, are we so anxious to have the text printed out, when it is

much lesser spacious and easier to handle in the digital format? Considering

this it would not hurt to do the reading from some sort of computer screen

and in addition use the splendid distribution channels provided by the

Internet.

To change the inherited and habitual way of reading a good book though, it

takes more than just scanning a text and formatting it for reading from a

screen of any kind. Because reading long stretches of text on a computer

screen usually is done with a slight strain. Improvements of technology are

essential if electronic media ever will substitute the printed word.

As things are now you read onscreen what you have to, like e-mail, web

pages, documents you are word-processing but hardly anyone does it by

choice. It is hard on the eyes. Any eventual sharp light nearby creates a glare

on the screen making you strain to see and reduces the texts visual

appearance. The texts onscreen are usually not designed to give comfortable

reading, like insufficiently leaded Times or Arial type. Moreover one becomes

restrained from moving around by the desktop. Even if you have a portable

laptop computer, your position hunched over the display is far from that

relaxed position you are in when reading a book in a comfortable chair or lie

reading in bed. It has simply not been an alternative to read a good

traditional book, trying to read an electronic edition of it onscreen.

Now it is likely that computer reading will be more common. Technology

improvements in the hardware sector, the e-readers and other handheld

devices, and the Internet’s exploding numbers of users with access providing

a distribution solution for this new media, has given the vision of a paperless


society fuel to takeoff. At least that was the expectancy and hope of e-book

manufacturers and publishers in the late 1990’s.

These companies are situated in the US and were the ones to start pushing

for the late –90’s vision of electronic reading. Unfortunately the vision do not

seem ready to face the market. Though the technology has improved, the

solutions are not good enough to attract a larger amount of readers. In fact,

besides two companies, Gemstar Inc. And Franklin Electronic Publishers

Inc., there are no other companies manufacturing and selling dedicated e-

readers even if there were several parties with that intention earlier. The

interest in the US for these e-readers was more focused back in 1999.

Although a handful of these companies have in the past four years built up

catalogues of literature for distribution by electronic bookstores, worked out

royalty rates and distribution formats for electronic publishers, for the US

market. They were still unsuccessfully trying to initiate production of the e-

reader models developed. The e-readers they hoped someday would replace

the printed and bound books and other paper media. But as we now know

this new industry has changed a lot in just a couple of years.

Publishing book texts for reading on a computer is not anything new,

however. The idea has old roots. Electrical engineers who were working with

the vacuum tube computers during World War II saw electronic books in

their dreams.8 The technology to turn these dreams into hardware was not

available then. Today it is not only available, but also abounding and cheap.

When the Apple PowerBook was introduced, old classic books like Alice in

Wonderland but also later contributions to the literacy as Jurassic Park was

about to be published for the portable computer. Project Gutenberg9 began

digitising as many public-domain texts as it could get hold of for download

from the Internet when the use of the Web increased. Public domain means

in this case that the period of copyright protection expired, nowadays

generally 70 years.

Peanut Press was another company with interests in digital publishing. They

published texts for Palm Computing devices, Glassbook have originated a

system to publish texts for Windows and Windows CE devices, which has

gained interest from Adobe and has been the injector for a co-operation

8 Wilson Jim, ”Read My Screen”, Popular Mechanics, Aug 1999, Vol. 176 Issue 8, p. 92


between the two companies. Librius.com was yet another company aiming at

the electronic publishing. 10 Other actors will be presented later. However,

none of those solutions approaches the problems. There still is the glare, the

bad layout, and other annoyances of reading onscreen. The e-reader

addresses these problems but does it succeed?

Electronic book readers have been developed in the past, but never caught

on. The new line of e-readers is leaner, lighter and less expensive besides

they have higher resolution screens than past ones. This explains why the

new generation of e-readers could be of interest to us. They are more of a

book than any other previous device for onscreen reading and could very

well substitute the ordinary book, at least to some extent. In the longer

perspective it might even give the traditional book a hard round because of

technology developments which in a few years are ready to hit the market.11

But is this new generation of e-readers enough competitive to challenge the

traditional book market? Business actors are hesitating and the engagement

from software developers has given a solution that gives the electronic

edition of books the same performance abilities like the e-reader devices but

on common PC’s, Laptops and PDA’s.

9 http://www.promo.net/pg/ (16 October 1999)10 See respective Internet based homepage on the Web, addresses under ”Sources”11 See under section 2.3, General Development


2.2. Product Presentation12

e-readers from SoftBook Press and NuvoMedia, two of the frontiers.

The idea of electronic books could possibly imply a great change in the way

we read and deal with information. Imagine being able to download a

newspaper or the latest best seller into your e-book. Then you can leave your

computer and read it when and wherever you like.

The e-readers are an example of hybrid products that combine the printed

word with the flexibility of a computer. Equipped with touch-screen display

technology and software enhancements including font resizing, an on-board

dictionary and a built in virtual keyboard you can use to make annotations.

The e-readers have their pros and cons but the e-readers out now is the first

generation and enhanced versions will come.

Using one of the first e-readers as the Rocket eBook, the model I have tried

for some weeks, is a new experience. While reading text on a computer feels

like reading text on a computer, reading an e-book almost feels like reading a

book. The LCD-screen is far from ideal but the weight and the distance from

the page feel familiar and comfortable.

To starter with e-readers try to provide an experience similar to traditional

books. The size and form reminds of a hardback book. Just turn the e-

reader on and then start to read. Reading along you turns pages touching a

push-button, forward or back. When you want to quit there is a possibility to

mark your place with an electronic bookmark. The e-reader models have a

stylus, which let us write notes as margin- or footnotes, as well as

highlighting and underlining text. You are then saving your personal marks

along with the e-book until you don’t need it more.

12 Product information at http://www.rocket-ebook.com and http://www.softbook.com, (1 November 1999)


One good thing with the e-readers is the background light of the screen

allowing you to read in the dark. Another helpful function is the on-screen

dictionary. Accessing the dictionary is easy, one model let you just point at a

word with a slight touch of a finger or the stylus and then the synonyms are

visible on the screen. The dictionary could be handy, especially for people

not having English as their mother tongue, when reading English texts.

There is no need to make a break to look up the word in a traditional

dictionary, which is practicably, expressly when travelling. You can also use

the e-reader as a dictionary beside traditionally textbooks.

Moreover a clever utility is the possibility to load the e-reader with your own

documents. This feature I believe is going to be valued among professionals,

who often or almost always are on business trips. It saves carriage and it

becomes easy to read on the move.

The e-readers now developed need a connection to the Internet for

downloading of electronic content as books, magazines, reference material,

newspapers etc. The e-book provides some advantages compared to the

traditional book benefits but also some disadvantages. To the benefits must

the easy access to reading material be counted, while the price is

questionable adjusted.13

The alternative e-readers are a software application to your computer,

whether it is the PC, laptop or the PDA. Many publishers with plans on

electronic publishing have for time being published books only in formats

assisted of these software solutions. This must however be seen as a

preparation for the future e-book market in my opinion.

2.3. General Development

E-reader developers, with just electronic publishing in mind, have staked out

the way for an e-book market with their work but the last year we have been

noticing traditional publishers and well established IT companies join the

scenery. The early, dedicated work was focusing on making the e-book

concept well known, to develop the hardware solution and to get the rights to

publish texts edited for the e-reader devices. The e-book business up-

runners even took active part of negotiations to set royalty rates. In the US it

has been hard to reach a mutual standpoint on the matter because the

13 More differences listed in SVB #15/98.


authors have taken position for higher royalty rates when it comes to e-

books, arguing that the profits of cost reduction for publishers has to be

shared mutually. That position is not however supported by the new e-book

publishers. The matter will be discussed under the headline of section 4, The

Actors.

The development of technology for the e-readers is however continuing.

Currently there is however only a couple of manufacturers in business (not

counting Palm Inc.’s PDA’s or other handheld computing gadgets). The RCA

Company, which has a licence agreement with Gemstar to manufacture and

sell the RCA brand - Gemstar eBook – models RCA- REB1100 and REB1200.

RCA in turn has an agreement with Thomson Home Electronics, the

manufacturer, while RCA is marketing the e-readers. These models are

based on and are almost identical to the former models from SoftBook Press

and NuvoMedia. The other company is Franklin Electronic Publishing Ltd,

which is marketing three models of the Franklin brand name eBookman.

These models are more the like of a PDA in form and function though. The

core developing is however not focused on the e-reader device now. The

development is in fact concerned of technology that is not suitable only for e-

readers but all portable electronic devices.

What will future e-reader and e-book look like? It is hard to predict, but it

will be exciting to watch how they evolve. If, for example, arguing for the

traditional book format, an e-reader made of paper or thin soft plastic and

bound in the familiar codex format that in a matter of seconds can become

any book you want to read, could be the future. But why be satisfied with a

device trying to imitate the institutional traditional book, when the small

electronic devices of the future could be like multimedia central units with

loads of features? Let us now take a look at the progress of the R&D. The

future of e-reading are definitely not software e-readers adapted for today’s

computers.

The cost of e-readers at the present seems a bit high for a new device in the

computer sector with competitors like laptops and palm pilots, which have a

broader area of use but this may be justified for some audiences.

Furthermore the price for each e-book is levelled a bit too high in

comparison with the traditional book, I believe. The e-book parties as well as

consumers hope that the price of the hardware and the e-book editions will


drop. But disappointingly there is no expectance that the prices on e-books

are going to be much lower than the printed book prices, not even in the

future.14

Therefor technology development rapidly changes the e-book concept to be

even more competitive. One technology, which may lower costs for the

hardware unit, is ultra-light LCD’s on plastic instead of glass. - ”Within three

years, the glass will be out of the screens, and it provides for inexpensive

displays.”15 We are not there yet. The display technology of today is one

dilemma for the small portable electronic devices. Can the problem be

solved?

As one example we might pick the company E-Ink Corporation, in

Massachusetts, working on a substance it calls Immedia, which can be

printed, like ink, on any substrate.16 It is made of tiny microcapsules that can

appear either black or white, depending on the electrical charge applied to

them. A radio signal describing a new text could be sent to the page to

reformat it instantly. But E Ink still need time to improve resolution,

contrast, reflectivity, and other characteristics to more closely approximate

the quality of standard ink on paper. E-Ink Corp. and Lucent Technologies

will work together to develop this technology for electronic books and

newspapers. Based on the Immedia substance and the plastic transistors

developed at Lucent's Bell Labs, which have the same properties as

conventional silicon chips but are flexible and can be printed.17 The objective

of the Lucent and E Ink collaboration is to print the plastic transistors onto

a flexible plastic film coated with the electronic ink.

Then the companies will have a flexible, plastic electronic display to

commercialise, entirely made with a process analogous to ink-on-paper

printing, rather than the more costly silicon-chip manufacturing process.

The same technology, which allows for instantaneous updating via computer

link, (radio signal or via cable), may be used for lightweight displays. Which

appears in consumer electronic devices like cellular phones, personal digital

14 Martin Eberhart, Exec Director NuvoMedia Inc, article on the 2 August1999 in ”Svenska Dagbladet”.15 SoftBook Press C.E.O. predicts future technology at NIST e-book conference 1999, www.nist.gov(10 November 1999).16 http://www.eink.com/, (10 May 2000)17 http://www.lucent.com/ and http://www.bell-labs.com/org/physicalsciences/, (11 May 2000)


assistants and of course e-readers. A system now used is the so-called blue-

tooth technology.

Electronic paper is another technology enhancement addressing the

problems of poor flexibility and high costs for computer screens. It is a

reusable display material, which also has properties similar to the ones of

ordinary paper. It stores images of texts or pictures, it may be viewed in

reflective light, it has a wide viewing angle, it is flexible and it is relatively

inexpensive. The material has many potential applications in the field of

information displays, including low power portable displays suitable for e-

readers but also wall size displays. Electronic paper utilises a new display

technology called gyricon invented by Xerox.18

”A gyricon sheet is a thin layer of transparent plastic in which millions of smallbeads, somewhat like toner particles, are randomly dispersed. The beads, eachcontained in an oil-filled cavity, are free to rotate within those cavities. Thebeads are bichromal, with hemispheres of contrasting black and white, chargedso they exhibit an electrical dipole. Under the influence of a voltage applied tothe surface of the sheet, the beads rotate to present either black or white. Apattern of voltages can be applied to the surface to create images such as textand pictures. The image will persist until new voltage patterns are applied tocreate new images.”19

For use with devices like the e-reader, rapid and direct electronic updates

have to be made however. The gyricon material has to be, in this case,

supported by a simple electrode structure on the surface if it is going to be

used like a traditional display. As the use of backlight are not necessary and

the requirement to refresh the display is gone, along with improved

brightness compared to today's reflective displays, lightweight and low power

applications will take favour of this technology.

Maybe the best way to read though is with a pair of glasses, not ordinary

ones but with a LCD-screen concealed in the lens.20 Just put on your

glasses, it could be sunglasses, safety glasses or glasses with corrective

lenses as well. When the user wears the glasses and turns the display on, an

image of a computer or video screen appears, with possibility to adjust the

focus and therewith allowing the user to place the image at a comfortable

distance. The resolution is as good as 320 x 240, in greyscale mode. Higher

resolution displays, 640 x 480 and 800 x 600, with colour mode are being

developed by the company.

18 http://www.xerox.com/, (20 May 2000)19 http://www.park.xerox.com/dhl/projects/epaper/, (20 May 2000)


The display can be connected to for example, a laptop or a personal digital

assistant like the Palm Pilot. These or other electronic devices like VCRs

generate a signal to be communicated with the small micro display to

generate the image that the user sees. The light rays are relayed to the eye

through reflectors within the eyeglass lens. The reflectors operate so that the

image can be viewed comfortably. The image visualised appears to float in

front of the eyes. The display can be turned off. The computer image will

then disappear and the glasses become just like ordinary glasses, the user

can see normally through the eyeglass lens. The integrated eyeglass display

is still in development and not for sale.

The three examples above is trying to handle the display technology problem,

which must be considered as one of the most important tasks. But the focus

is however right now set on the software. Software that actually making the

e-books more spread. Software giants as Adobe and Microsoft have joined

the race, so has the media concern Gemstar done and they is buy acquiring

NuvoMedia and Softbook Press. Furthermore the traditional publishers are

beginning to show interest as well as on-line bookstores. Software

enhancement aims at better e-business solutions and better visibility on-

screen. You should be able to read e-books on an ordinary computer-screen,

so that you do not have to buy an expensive e-reader, just to read books on.

These companies are not really interested in e-reader devices as the

committed ones that pushed for e-books from the middle of the 90’s up to

date. They are more interested in the digital publishing, which now has

started to grow explosively.

The most important and now somewhat lacking part of the hardware system

is the display, which has to improve a lot to challenge the traditional book.

By the research work presented above we understand that the future e-

reader will be more competitive.

While research work for future electronic publishing concerns display

technology and software enhancements, for good reasons I believe, as on-

screen reading and business systems are the most important parts to make

improvements to, the e-reader developers have to improve other things as

well. Just like the traditional book, e-books are designed for you to leaf

through static pages of text. But give them time, divorced from paper and ink

20 http://www.microopticalcorp.com, (3 June 2000)


and married to electronic media, the literary work one-day becomes even

more of a total experience. But then of course it is not longer about reading a

book...

2.4. Technology Solutions21

2.4.1. Hardware

Current technology solutions for the e-book are changing by the research

work I briefly described above. This goes both for the e-reader and the e-

book’s supporting software. However we have to face things as they are right

now, not just future developments, if the purpose of this essay is going to be

fulfilled, because an e-book publisher has to know on which conditions he or

she are going to business on. Does the available solutions provide defensible

marketable qualities, are there any standards, if so, are they open or is there

any proprietary rights concerning these standards.

What device will be in advantage, the dedicated e-readers, laptops or maybe

the palm-pilots (PDA's) or the web-pad22, what OS will support the user,

which type of screen will be preferred and how to download e-books to the e-

reader? The matter of technology solutions can be divided in two areas,

hardware and software. As a consequence of the lack of standards on

deliveries and of software systems, the publishers and on-line bookstores

has to offer more than one format of the e-books they are selling.

If you buy an e-reader, you have to stick with a special edition, as with

Gemstar’s e-readers. While a laptop would manage all formats, one just need

to install the software needed for reading. But then you are stuck with the

laptop, which is clearly not developed to read books on. The same goes for

palm-pilots of different kinds; furthermore their screens are not in an

acceptable size for reading books. The web-pad provides an interesting

solution that is not far from the e-reader, but it is more competent. The web-

pad is primarily intended to be used when surf the web. This ability is

positive for the e-book readers as they easily can connect to Internet and

then download an e-book directly. The security matter, which is necessary to

protect the IPR investments, has not been an issue to the constructors of the

21 Information on technology solutions provided by the Internet homepages of companies mentioned. Pleaserefer to list of references.


web-pad yet, but on the other hand it is likely that they will be able to use

Microsoft Reader or Adobe Acrobat e-Reader. Microsoft is now also beginning

to argue for a new product, their ”web-pad”, called Tablet PC.

It leaves us with the e-book concepts of Gemstar or Franklin, the e-reader

software’s provided by Adobe or Microsoft or the PDA solution through

publishers Mobipocket and Palm Inc. The characteristics of an e-reader with

today’s technology are as follows. One single display, touch screen, of LCD-

type with average 150-400 x 300-600 display resolution, background

lightning, greyscale or colour, with controls for adjustment of background

light, contrast and brightness. At the size of about 15x20x3 cm and a weight

of 0.5-1 0,5-1,0 kg it matches the size of a typical hardback book.

In the case of the hardcover-size RCA Gemstar eBook RCB1200 reader and

the paperback-size RCB1100, they display only one page at a time, giving the

position in the book by side numbering or in percentage. In comparison to

the e-readers, reading a Palm Inc text downloaded to a Palm Pilot must be

even more unpleasant, because the screen is only of the size, 5x5 cm. In

Japan two members of the E-book Japan consortium are manufacturing

LCD screens suitable for the e-reader the consortium deliver, Sharp and

Toshiba. Their displays have a bit better performance than the ones used by

the US manufacturer RCA.

The power source of an e-reader is rechargeable batteries with approximately

10 to 40 hours of life length before recharging is necessary, depending on

which model you use. The number of e-books you can load in the e-reader

varies with upgradeable memory cards but there are great differences, from

the capacity of 4.000 and up to 100.000 pages.

Downloading books might be done from a normal phone jack via the e-reader

built-in modem or via a computer with the e-reader connected to the serial

port. Another solution was used in EBJ’s field test. There you have to go to a

store, which provides a special download station. This could be a good

solution as bookstores have possibilities to form large libraries and well built

up search engines for text materials. Furthermore the protection of the

intellectual rights in this case would be easier I figure. But in the long run

the customer certainly would appreciate to acquire the literature directly on

22 http://www.ebooknet.com/ (Planned e-reading devices, Webpad), 20 March 2001.


the Internet, from home or work. Even if it requires a computer or other

device to access the Internet and therewith get the most out of it, like

searching for e-book titles on the web, visit online bookstores and so on.

When talking about the different e-readers function one interesting issue is

the OS, which by all means are the component making the user able to

communicate with the software displaying the text, downloading material or

communicate with other systems like a PC. The reason for bringing this

matter up under the hardware solution headline is that the topic has neither

direct connection with the software displaying e-books nor the electronic

content. The OS processes orders given, for example by touching a button

one can have information sent to the program viewing the e-book that the

next page shall be displayed or that another book shall be loaded.

Most common for small portable electronic gadgets is the Windows CE OS or

the new Pocket PC OS, which is not very hard to understand as Microsoft

made them compatible with the Windows series OS. A reason as good as any

for Microsoft to engage in the e-book industry. Microsoft has taken the

decision to support the OEB standard, which not surprisingly is compatible

with their products, e.g. Microsoft Reader. More about OEB in the following

part. This ensures a reader using a PDA or another device with the Pocket

PC or any Windows OS to have access to a great amount of electronically

published texts.

As Gemstar is using a proprietary system for use in their products, it

represents an example of a closed system that has to be opened up to be

compatible with other products. There are advantages with closed systems.

The most important is the protection of the intellectual property, which is

easier to manage if the system is not an open one.

Franklin EP’s eBookman represents a solution, which is a multimedia

content player that allows you to read books, listen to audio books and

music, and record your voice, all on a device. The e-reader also incorporates

organiser functions, natural handwriting recognition, and a multimedia Card

slot that lets you expand device memory by up to 64 MB presently. The

eBookman features a 200x240 display that shows 87% more information

than ordinary PDA’s.


Franklin designs its own OS and CPU’s. No other chips are required other

than memory and LCD drivers. Expensive external IC's such as DSP chips to

decode audio or USB chips for communication are not needed. Franklin

accomplishes this in its single integrated 32 Bit RISC CPU and through its

software

Franklin also offers digital rights management and the world's first open but

secure architecture assuring both publishers and application developers

security and availability. How about the additional supporting hardware and

software applications, which makes the e-reader work as intended? The

issues are to remain uncommented herein, as there are no chance of

explaining all the different software solutions in a satisfying manner. Let’s

take a look at the software displaying the e-book.

The PDA’s works in a similar way, connected to the computer you load them

with e-books that are downloaded from the Internet sites of Palm Inc and

Mobipocket, while there is no such ready concept for the so-called web-pads.

2.4.2. Software

The literary work is prepared as a digital edition, which is displayed on the e-

reader. Which technology is the best suited to do this. The Open eBook’s

Publication Structure Specification, OEB23 is a content format for e-books,

based on HTML and the enhanced XML standard. OEB has become a first

standard format and serves as a base for all e-book editions. The Open

eBook group has presented a detail specification on the content format in

the 21st of September -99.

Even if OEB is accepted as a first attempt to reach a standard for the e-book

text format, no common standard exists yet. Not for electronic copy

protection or distribution either. Publishing e-book titles require the

publisher or author to pick an e-reader model, or a software reader, and

work with the manufacturer’s own publishing and distribution tools. Each

company has its own technologies for page layout, copy protection and

deliverance, effectively locking each text to a specific e-reader platform.

Besides that the design of the texts themselves, some consider not to be

successful.

23 Specification on: http://www.openebook.org/, 15 April 2001.


The situation is not surprising at an early stage in a new IT product’s

development, such as the e-book. It could be compared with the scenario

recently played in another IT-field, the Web. The first product manufacturers

to the market are staking out their territories with proprietary features, but

most of them also recognise that the market will require open standards in

order to flourish. A standard will benefit publishers by allowing them to

format their texts just once for a wide variety of e-reader platforms. As result

of this, booksellers will be encouraged to a quick build-up of content that

will attract readers to the e-book idea.

Regarding the design of the texts both Gemstar RCA e-readers and uses text

formats based on HTML. The OEB standard is implemented into the system.

Other members of the Open eBook group as publishers Bertelsmann,

HarperCollins Publishers, Penguin Putnam, Simon & Schuster, and Time

Warner Books have declared that they will utilise the new standard. One

must remember though, that the font appearance is far from perfect when

using the OEB and the e-readers from RCA suffers from their relatively low-

resolution and small screens. Franklin EP has besides the hardware e-reader

also developed a software e-reader application, which is suitable for Palm

OS, Windows CE/Pocket PC and Psion devices.

Some of the limitations of the e-readers above seemed to be addressed by

Everybook’s EB Dedicated Reader, which presents, besides the two-page

spread on 300-dpi colour screens, texts in PDF, which strives to mimic the

printed works. EveryBook's contribution on the e-reader market is however

delayed.

Microsoft has their own solution to improve the font appearance on the

screen. Microsoft Reader with ClearType technology, which is designed for

Windows machines, is a new product to make it easier to read from a

computer screen.24 The e-reader also works with Pocket PC 2002. It seems

that it is Microsoft’s intention to defeat the hardware e-reader industry and

as an alternative to these make electronic reading comfortable on computing

devices containing a Microsoft OS. This recalls how Microsoft managed to

make their Internet Explorer market leading Web reader. In order to use the

e-reader one must activate it, which can be done on up to four devices with a

24 http://www.microsoft.com/news/, (10 September 2000)


single persona. The activation of Microsoft Reader means that you identify

yourself as the person who will be using your reading device.

The activation process adding special software to the Microsoft Reader

installed on your device so you are able to read content packaged for secure

distribution. It is a software module unique to you and your device called a

"Secure Repository". This module uses a Microsoft Passport account number

and information unique to your device to protect e-book titles against

unauthorised copying or distribution. The process is a necessary part of the

Microsoft e-book system, because the requirement of strong copy protection

for e-book titles.

An activation certificate is also downloaded during this process, which

certifies that your copy Ms Reader is enabled for viewing protected content.

This security provides you with access to many premium e-book titles that

have been copy protected. The Activation Certificate is encrypted for privacy

reasons and used when you purchase or download copy-protected titles.

Another interesting contribution in the e-book business was represented by

Glassbook Inc, a company now acquired by Adobe, which worked towards a

vision about future electronic reading.25 They were mainly working with

publishing of electronic content for Windows machines, though. Glassbook

developed a software application called the Glassbook Reader, now a part of

Adobes e-reader software.

2.5. Proprietary Rights Concerning the E-Book

2.5.1. Copyright

This is a presentation of the technological and contractual solutions, which in

combination with legal protection are used to protect the electronic published

texts of today’s actors. I will then describe the legal matters addressed under

chapter 5.4.1.1.

The main e-reader actors, Gemstar and Franklin with their hardware

solutions, Microsoft and Adobe with their software e-readers and Mobipocket

and Palm Inc with readers for PDA’s, are aware of that they has to create

generally accepted solutions for the protection of the copyright. And that

compatible secured forms of e-commerce is being implemented. Solutions

25 http://www.glassbook.com/ (2 February 2001)


that are used for copyright protection at the present are combining legal and

technological protection with agreements on sale. If not, the publishers has

to consider their participation at great risk of loosing control over their

material.

Copyright protection can be divided into two separate systems. First, most

countries of the world has copyright legislation, which declare that copyright

infringements are considered criminal where the offender can be prosecuted

and that may carry a fine or imprisonment, look up the Swedish Copyright

Act URL 53§, as an example. Furthermore the law prescribes that the

offender shall indemnify the owner to a copyright protected work, URL 54§.

Second there is the copyright protection that the author or the owner of the

copyright can implement when transferring a copy of the protected work to a

customer. There are two ways of doing this. One way is to use technology in

a way that secures the work from being copied but also to implement a

system that ensures that the origin of the work is at present in every copy

being made. By these measures one might be able to trace down the

infringing party. Another way is to delimit the use of the work by contractual

clauses between the copyright owner and the customer.

The reader will find solutions chosen by the e-reader manufacturers

hereunder to the extent of technology and contractual matters. The law given

protection will be discussed later as well as the possible ways to implement

copyright protection in a business system like the e-book concept.

Gemstar’s two e-reader models uses as mentioned a closed proprietary OS

not known as a flexible one as the literary work, is being locked to a specific

e-reader. However it is an effective measure to protect copyrights. The

system has a complex function and manages the most matters of e-

commerce together with important copyright protection and authentication

solutions.

Franklin and EveryBook have chosen another path. Franklin are not only

publishing e-books for their eBookman but also in other open formats and if

the EB Dedicated Reader will be released, market has yet a contribution of

an e-reader platform with an OS that is as described above an open solution.

By this the EB-reader will come closer to a PDA solution or the laptop.


What do this imply on matters of copyright? First there is a risk that the

copyrighted material will be easier copied and second the system could be

more vulnerable for unauthorised attempts of entering it.

Another example that can be of interest is the Swedish e-book publisher e-

Lib, which is a co-operative initiative between a number of interests on the

Swedish publishing market. The policy of e-Lib is to accelerate the e-book

market and the electronic reading in Sweden through an open co-operation

for those who are willing to join the mission.

In accordance with the selected path e-Lib are not offering e-book editions

for the Gemstar e-reader models but only for the software e-readers from

Adobe and Microsoft and Mobipocket, which are applicable on open OS. The

effects on copyright protection due to this choice will be examined further

on.

2.5.2. Patents

The matter of patents in the e-book industry is not a topic as hot as the

copyright issues. To some extent this may depend on that the technology

mix that is used in the e-readers are not spectacular or not even brand new.

The matter is more of how existing technologies are being used together with

the new software applications, a sort of conceptual thinking.

NuvoMedia had for instance just a US design patent26 granted, for their

Rocket eBook but others concerning the function, pending. SoftBook Press

on the other hand had patented a system covering secured deliveries and

copyright protection etc.27 (Gemstar are now holding the patents). EveryBook

has for example patents in US, Canada and Australia but pending within

EU. The patent concerns a personal electronic book system, though their EB

dedicated reader is not available yet, it is uncertain when or if it will be. 28

One make the reflection when studying the patent files in the online register

at the US Patent and Trademark Office that there are several of patents

aiming on devices like the e-book though.29 However there are not only

patents aiming at the E-book concept as it is described above but also a

great variety of technologies that might show handy for the e-reader

26 US Design Patent No d404 76127 US Patent No 595603428 US Patent No 576148529 http://www.uspto.gov/ (4 May 2000)


platforms. Patents of this kind can be found in the register of patented

products back to the middle of the 80’s.

While putting together a product like the e-reader it might be necessary to

use existing patented technologies if the aim is to assembly a competitive

hardware e-reader platform. When for example a product like the E Ink is

finally developed it might be of highest interest for the e-reader manufacturer

to use the technology within the E-book concept. Issues of patent licensing

are then rising. I think this is one of the main fields of the patent area where

some considerations have to be made, because the current manufacturers

do not develop the underlying technology for their e-readers. They simply

have to use technology from the high-tech companies in the frontline of R&D

concerning handheld computing and IT. This must be done by patent

licensing agreements, I figure. Which laws and regulations is apparent

concerning these matters and how to contract a patent license? The issues

are briefly discussed under the headline 5.5.1 Patents.

2.5.3. Trademarks

US companies within the e-book business are aware of the importance

trademarks will impose in the future as a proprietary asset. Rightly

marketed registered and then aggressively protected by not allowing any

form of infringement on the trademark, it could very well stand for a great

amount of the company’s value. Hereunder is a brief commentary of the

most important issues on the trademarks in the business.

New markets tend to change a lot during the initial stage. The pioneers

NuvoMedia was pushing hard for making their trademark Rocket eBook well

known in the market both in consumer and business actors’ mind. SoftBook

Press did follow marketing their SoftBook while for example Everybook,

which not has put their product on the market yet is not using this

aggressive trademark employment that the two with products on the market.

Why is that? One can assume that NuvoMedia as the first developer

marketing an e-reader on the market has had developed their trademark

strategy a lot. Further on they have grown maturer in the sense of

marketing, which is an area where trademarks are and will be even more

important.


When Rocket e-Book and SoftBook were becoming established trademarks in

the e-book business the conditions changed. Gemstar acquired the both e-

book companies. The trademarks were then by necessity outmanoeuvred

when Gemstar launched recent releases of modernised models of the e-

readers in co-operation with RCA and Thomson. Was all the time and efforts

spent on making these trademarks known, wasted then? The answer must

be that it depends on whether the profit from the transfer did cover the costs

of developing and marketing the products, for NuvoMedia and SoftBook

Press. If Gemstar where judging the concept strong and the trademark were

considered identifying the product niche, a higher price was naturally gained

and the efforts were then justified.

Trademarks will also be important within the use of licensing agreements

when business actors chooses to use trademarked products owned by others

in their concept. This is only some general reflection on trademark/brand

name issues. The trademark as an intellectual property will be briefly

examined under section 5.4.1.3.

2.6. Standardisation Issues

When parties involved in a product or product market agreeing to do

something in a certain way as to use the same technology solutions, it is

actually the formation of standards, which by definition is recommendations

or specifications to design a product or employ a production method.30 The

purpose of the standardisation process is to reach the best possible practice

for a product, in both a commercial perspective and from demands of

practicability. Common standards are important because they free

consumers from the fear of investing in new technologies that soon could

become obsolete. When a variety of industry participants agree on a

standard, consumers can choose products from any manufacturer that

supports the standard, facilitating early adoption and a proper market

definition.

The companies within the IT sector has approached the standardisation

issues mainly by collaborating in fora and consortia31. The obvious reason is

the need for faster lead-times developing standards and direct participation

for the industry, which supports the commercialisation processes. At first

30 S Nyström, page 4. (Referring to Standards – The Common European Language, SIS).


the old structure, which is described later on in chapter 5.3.2, for approving

of standards was unable to meet the new demands on the accelerated

technology progress. Now we have been seeing a development towards a

unity.

Because the intense research activity in the IT sector a need for standards to

facilitate commercialisation and create new markets is of vital importance.

E-book technology is new and consumer oriented so industry players such

as NuvoMedia, SoftBook (now Gemstar), EveryBook, Microsoft, Glassbook

and Adobe recognised the need of a general standard, designed to catalyse

the adoption of the electronic reading and to stimulate the growth of the

industry. Therefore it was not surprising when National Institute of

Standards and Technology (NIST)32 initiated a forum for the E-book industry

parties, the OpenEbook Organisation, that almost all of the parties become

engaged in the matter. NIST has the US government mission to develop and

promote measurement, standards, and technology to enhance productivity,

facilitate trade, and improve the quality of life.

The OEB group was formed in October 1998 at the first annual conference

for the e-book industry. NIST was leading the effort to bring industry actors

together in the purpose to create a voluntary, common standard.33

Participants included more than 100 major software companies, book

publishers and e-reader manufacturers. The forum were interesting in the

perspective of how the already established proprietary solutions in the

fledging e-book market could be combined, or if the matter of prestige would

hinder the formation of a standard.

The existence of an industry forum like the OEB does not guarantee total

conformance to the proposed standard, and the OEB Forum lacks naturally

any kind of enforcement power. But the number of organisations signing up

as charter members is a strong sign that both producers of e-books, e-

readers and supporting software applications perceive an advantage in

sharing content across platforms. Co-operation of this kind aims towards a

common use of same or similar and compatible technology.

31 Read further on the formation on standards, under section 532 Please, for information on the organisation visit: http://www.nist.gov/33 http://www.nist.gov/public_affairs/, (3 November 1999)


This issue has not been of any great concern in Japan however as the EBJ

consortium has gathered a group of interested companies and these together

already, before the start of manufacturing and marketing, have created a

frame for the concept. An opposite situation appeared, as we know in the

US, where a handful of developers did their own race to reach a market

leading position, which meant that different non-compatible solutions were

developed.

For a period of the last three years the lot of publishers, e-book

manufacturers and even software developer giants Microsoft and Adobe has

had a co-operation on e-book related matters through mentioned forum.

NIST was then in September 1999 arranging a second e-book workshop to

set an open standard.

The workshop furthermore examined other factors affecting the E-book

industry, like technologies that allow readers to download text from web sites

directly into their e-books to legal issues involving digital right management.

The meeting approved as a first standard for the E-book content the draft

specification known as the Open eBook Publication Structure Specification

or, the OEB standard mentioned earlier.

The choice of standard for text layout was not definitely however as Adobe’s

PDF were competitive and preferred by at least one e-reader manufacturer,

EveryBook. Finally Adobe acknowledged the OEB standard when acquiring

Glassbook concept and by this implemented the OEB in their PDF system,

which already worked like a standard within the publishing industry and it

also offers publishers an easy way to e-book publishing.

Though an open standard concerning the text format has been approved it is

not enough. The additional supporting software, as for example solutions for

deliveries has no standardised structure yet, neither are the techniques for

copyright protection. The solution of standardised and compatible

deliverance systems is an issue, which is critical for future e-book

commerce.

Each publisher has developed proprietary technologies for copy protection,

ensuring that books, once downloaded, can’t be copied, printed, or

distributed to other e-book users. Gemstar encrypts each title so that it can

be displayed only on a specific e-book unit. Librius.com was planning to offer


publishers a secure delivery method that streams titles through the

customer’s computer into the e-book’s storage, so no copy exists in the file

system. EveryBook had the intention to use digital certificates and storage-

device serial numbers to authenticate anyone downloading a title; it would

then save text files on the e-book’s storage cards in read-only format. If you

lend an EveryBook digital text to another EveryBook user, your own copy is

disabled until the text is returned.

The Electronic Book Exchange working Group, which was organised on the

initiative of the company Glassbook has been working on a specification

draft for copyright protection and distribution of e-book material, aiming to

be a standard solution. The EBX specification complements the Open eBook

specification and is designed to be content format neutral, but specifically

supports both Open eBook's HTML-XML format and PDF.34 Former frontiers,

NuvoMedia and SoftBook Press were not part of the EBX Working Group

because they on the other hand, believed that proprietary copyright and

distribution systems are requirements due to their business models. The

EBX Working Group does however include several important actors as,

Amazon.com, Adobe Systems, Philips Electronics and publishers as

Houghton-Mifflin and Lightening Print. Other companies with interests are

Microsoft, HarperCollins, and Xerox.

Besides the EBX Group and the leading distributor of e-readers, the

American Association of Publishers took an initiative to investigate the

security in available solutions. The survey involved testing of technological

solutions for open network protocols to provide a security assessment of

certain e-book systems. Those are the proprietary systems of Rocket eBook

and SoftBook, now joined under the Gemstar, and Peanut Press. The result

was presented in a report from the Global Integrity Corporation.35

The matter of standardisation is generally described under section 5.4,

Technology and Standard, where also a couple of strategically important

reflections are done.

34 http://www.techweb.com/news (E-book Standards Process Faces Rough Road), (11 November 1999)35 E-Book Security Assessment: General Report from the Global Integrity Corporation, 1999


3. Drawing up a New Market (Market Structure)

3.1. Project on e-books

The School of Economics and Commercial law

The School of Economics and Commercial Law in Gothenburg have had a

project on e-books going on. The idea of using e-books is a result in regard to

an expressed need of the possibility giving students on the ICE programme36

whom studying abroad a chance to update their literature fast and easy,

from teachers on the ICE programme.

The thought was that a great opportunity to test a new device that might be

useful for students at the University of Gothenburg should be seriously

examined. The e-book could be useful not only as an information bearer but

also as a tool in a creative process using the e-book to publish work done by

students and therewith learn more about one of the most recent released IT

products.

NuvoMedia’s Rocket e-Book was the only e-reader available at that time, so it

had to be the one bought. The school had got the hardware but how to get

the literature. No publisher in Sweden had started to sell e-book editions yet.

A few had given the idea some more thoughts, but it seemed that all of them

have adopted a wait and see policy.

At this stage the school’s library was involved to take further contact with

the publishers of certain works of interest for the students at the ICE

programme. The library managed at last, to get hold of some titles of

interest.

The students, who tested the e-reader has been questioned about their

opinion of the e-book concept and if they appreciated the test period. Here

are some conclusions of the brief survey and the project as a whole.

Students given an e-reader have not been able to use it in their studies, as

the relevant literature was not available at the time the course began. When

summarising their opinions there is a remarkable predominance in their

experience that the e-books are not very well suited for reading of student or

professional literature. This is a conclusion totally on the opposite of the

early e-book industry’s which meant that students and professionals were


considered a primary market target group.

Because of the relatively delimited employment for the e-reader out in the

hands of the students the survey are not to rely on but it recalls my own

experiences well enough.

What can we learn from the project then? One thing is sure, there is no

ready market for the e-book in Sweden, but that will change now when

publishers are beginning to publish e-books. It will take more than just start

up the publishing though. Another reflection has to be made of the

experience from reading on an e-reader. It is not the perfect tool for a

student or a professional that one might have hoped, as functions like

making annotations and underlining text are not by any means as effectively

done as in a traditional book.

The City Library of Stockholm

In a joint field test the City Library of Stockholm has given the community

members possibilities to borrow e-books. This is done in co-operation with

eLib and they are offering e-book editions for Adobes e-reader, but no

evaluation of this trail is available at this time.

3.2. Current market

This section will introduce the current market. So far the development on

the market has been most moderate but it is not unbelievable that the

market will increase significantly, one might compare with the revolutionary

increased usage of the Internet. There are a number of actors at this market

but only two companies’ offers an e-reader device. Other parties are simply

formatting texts for computers like the laptops and the palm pilots.

The market leader must be considered Gemstar with the RCA e-reader

models REB1100 and RCB1200, which has sold around 20,000 units up to

date.37 Not that much compared with the figures of PC’s, laptops and PDA’s

sales, devises on which e-books also can be read.

The market is not settled and the e-book seems to be a bit from a

breakthrough. What is the market like then? The vendors and the customers

36 ICE, ”Internationella Civilekonom Programmet” at the School of Economics and Commercial Law inGothenburg.37 25 March 2001


have not been interacting at all yet, so what is the response to the new

product and is there a future for e-books?

The parties initiating the market were the same as the early e-reader

developers in the US. They did believe in that their products were going to be

successful and that they represented a new way to read, which may conquer

the traditional published book.

At the US market there are now several on-line bookstores offering e-book

editions.38 In Sweden it is also possible to buy e-books from a limited line of

editions. Publishers have established co-operation channels and by this they

can provide the market with e-book titles. This is done in an easy way.

Publishers format text editions suited for the software e-readers. It is up to

the customer to decide which e-reader to use. The customer’s choice is made

from a practicable view concerning the use, as the e-readers are free to

download and at no cost for the publisher or on-line bookstore either.

In case of the dedicated hardware e-readers, there are only two bookstores

on-line offering e-book titles. Gemstar e-books are sold at Powells, while

Franklin offers e-books on their own on-line bookstore, formatted for the

eBookman. The reason is that were any proprietary technology is involved

the cost seems to be higher. Why e-books haven't grown in popularity and

established a marketplace can depend on a couple of issues, 1) the screen

resolution technology and, 2) Availability and public awareness of the

product. With today's technology, so the argument goes, it is too difficult for

the human eye to strain through a whole novel at 150 dpi. Fix the font

resolution on the screen, and the e-book market will materialise, if the

availability is before hand.

3.3. Future market in Sweden, a Scenario

3.3.1. Initiating the Market

Who may take initial action of the commercialisation in Sweden, the

established publishers, a new e-book publisher or any electronic device

retailer (-net)? So far the publishers in Sweden has shown no or little

interest of the E-book concept. It might though be a deliberately chosen

strategy not to show what they are up to. E-book publishers or online

bookstores might be the correct answer to the question. I have been spoken


with the Market Manager of bokus.com and he seemed eager to find a way of

selling e-books. But as yet a proof for the variable new market, bokus.com is

now a part of BOL, which have no interested in e-books at this stage.39

An e-publisher might serve well as partner for an on-line bookstore. The e-

publisher could search actively for writers willing to publish their works in

electronic editions. A complication in this though could be that the rights to

already published works in almost all cases belongs to an established

publisher in one way or another, only new works are then available for e-

publishing. But then again the right to make e-books of a certain literary

work and distribute and sell these, is of course for sale if the price is right.

I am convinced that it would not be easy to contract a writer as long as the

volumes are low. It seems more profitable for the author to sell the

publishing rights to a traditional publisher company and let them decide to

which extent the book ought to be digitally published.

If the traditionally publishers let the ”e-book scene” for other actors but the

online bookstores not themselves or in co-operation with an e-publisher are

able to make the e-book competitive, are there some more alternatives?

This is why the Swedish company eLib has an interesting model of doing

business. First the company is established by some traditional publishers,

this means availability of literary works for conversion into e-book editions.

It also means knowledge of the literary market as a whole. Second the eLib

has recognised the need of an open model where any actor with interests in

the branch are invited, which means even greater possibilities. To make

arrangements of secured distribution a co-operation with Microsoft is

initiated.40 There is a snag in eLib’s model though, that its built on the

assumption that readers are willing to read e-books from a computer or a

PDA, which obviously are not dedicated to read from.

What if someone is starting to sell e-readers in Sweden addressed to Swedish

customers? Will a demand for e-book titles prepared for the Swedish market

and that specific e-reader rise then? And when the demand grows strong

enough will the publishers enter the market in a broad sense? What sort of

business has the capacity to start selling e-readers? It has to be one of the

38 Amazon, Barnes & Noble, eBook.com, Powells among others39 At www.bol.se, 15 October 200140 www.elib.se (24 June 2001)


large Swedish retailers in consumer electronics like SIBA, ELGIGANTEN or

ONOFF I figure. Is there an interest from these market actors towards the e-

reader and the e-book concept at all? 41

Furthermore, is it possible for writers to bypass the publishers by publishing

the work on their own? It is by no means impossible and not too expensive

either.

3.3.2. Market target groups

Students is the first target group according to the e-book companies. They

are assumed to have a need, or at least going to, of this kind of resource to

assist them.42 And in a couple of years they are so used to this equipment

that they probably will go on to use it even after their studies. Students are

also in general more open for new technology.

In this segment it is rather likely that the schools as well will have an

interest, it may very well hold down costs for them and make the handling of

course literature easier.43 And as we have seen above the thesis are

supported by the e-book project described. E-book businesses are working

aggressive towards the schools and it is understandable, as this market is

enormous.44

But also professionals like lawyers, doctors and others would have benefits

from this product at least according to the manufacturers. Over all,

companies with lot of updates in their manuals and instruction books

should think about this possibility. As the IS manager at SAAB automobile

AB says – ”the solution is of interest to us, but standards and compatibility

are important issues”. The GM concern has a team that constantly seeks for

better IS solutions and ways to integrate them into existing systems.45

3.3.3. Marketing and distribution

Real growth of volumes has not been sighted yet in the US or anywhere else

and there is not really an existing market in Sweden. Is it then possible for a

single business in Sweden to start selling e-books exclusively for the

Swedish market? Well, the answer is that it depends on which actors that

41 Companies say they are not planning to market any e-reader in a foreseeable future.42 Art. market survey www.ebooknet.com/topics.jsp?topic=Home:eBook+Business:Markets/, 20 March 200043 Check for example at; www.civic.com/news/archives.htm, 20 March 200044 Read on; www.ebooknet.com/topics.jsp?topic=Home:eBook+Business:Markets/, 24 May 200045 Interview with Lars G Magnusson at SAAB Automobile, IT department, February 2000.


start up the business, but also what the intention is. For example an

Internet based bookstore like BOL46, would with small investments be able to

have a download section on their site, where customers easily could buy e-

books online. But the literature would then be only on English and the

assortment would be the same as in the US, simply because it is the only

market where electronic editions of literary works is present and then only to

delimited extent insofar. Are the Swedish readers that interested of e-books?

No, it is not likely. It will be necessary to provide literature on Swedish if the

e-book shall be marketable. But then it seems more or less impossible to go

on without co-operation with a publisher. Another question for the new

business is whether or not it shall provide the e-reader by post delivery or let

the hardware marketing and selling to some other party.

Distribution

Deliverance can be done via computer networks as the Internet or in the

format of CD-ROM or memory cards, which is the most suitable way to go?

Is the best to buy a system for the commerce from a product developer or is

it better to develop a system from scratch. Internet can be used from home,

in a regular bookstore, Internet cafés, book automates or any other

marketplace available. To starter with it seems adequate to choose

distribution only via the Internet and then directly to the customer.

Deliveries should then be done within a system like the one Microsoft has

developed to support the Microsoft Reader, the Microsoft Digital Asset

Server, which is a comprehensive end-to-end framework for enabling secure

distribution of digital works. It safeguards intellectual property and manages

to deliver digital content to broad audiences.47 These issues are but so

important for authors and publishers.

Marketing

The online marketing withholds several topics of interest, mainly because

the marketing can be much more refined than traditional marketing and

there are also great differences. We have two initial advertising components

in online marketing that differs, first the instantaneous market size

(worldwide) and second the growth of Internet and e-commerce. There are

46 Bertelsmann on-line, (www.bol.se)47 www.microsoft.com (21 October 2001)


some tools to manage the online marketing, like: CRM and personalisation of

marketing, the use of e-mail and spam, affiliate programs, which can mean

utilisation of search engines, incentive campaigns and co-branding. There

are also viral and direct marketing and branding efforts. I believe that e-

marketing is important and must be implemented into the e-book actor’s

business plans.

So how does it work in the e-book business up to date? Internet advertising

is an important aspect of online marketing but so far we have seen little of it

within the e-book business. According to some actors, the medium is dead.

Can it be? We have seen the IT-boom coming to a brutal stop. The

flourishing IT society has had a down period, yes, but is it not only adjusting

to the changing landscape of technologies and maturer electronic

environments? The future will tell.

How does the online marketing correspond to national marketing laws and

are there any applicable international rules to this highly international fact?

See further under chapter 5.4.1.

Electronic commerce

Let’s say that the distribution technology is set and that the marketing

efforts succeeded, the next step must be to create a system managing the e-

commerce. How to verify the agreement, by digital signatures, is it necessary

at all? Is the business dependent on an encryption solution at delivery, to

minimise piracy copying? More over is there a need of authenticode solutions

to guarantee that the rights of a literary work belong to the provider of a

downloadable work?

One solution available is Adobes technology the ”PDF merchant”, managing

encryption of PDF files and distributes keys to access them and as a

complement ”Web Buy” to ease up the net distribution in a digital secure

manner, a system similar to Microsoft’s Digital Asset server. The e-reader

distributor Gemstar also supplies a proprietary safety deliverance solution.

The payment method is also a part of the transaction system of e-commerce.

Several ways of handling the payment are possible even if Credit cards are

the number one choice right now. There are also transfers via buyers’ bank

directly (charging the customer’s banks account directly) to the seller online,

cash on delivery etc.


Online Privacy

Some words of consumers right to privacy has to be stated as the computer

networks in some way or another are gathering and storing data of personal

character. Hereunder is the privacy policy of Gemstar, which could serve

well as an example of how the e-commerce business tackles the problem.

The legal issues are addressed under chapter 5.5.5, Consumer Protection.

”…committed to protecting the privacy of its customers and their personalelectronic communications with the Company. We do not sell, trade, rent, orshare your email address or any other specific personal information withoutyour consent. When we do ask for information it is for a specific purpose—suchas sending you free software or product and service information that you haverequested, or processing an order you have placed. Our order-processing systemuses secure server technology to protect your credit card information. We mayprovide our publishing and other strategic partners with aggregate statisticsabout sales and customers, but these statistics will be anonymous, without anypersonally identifiable information…”.48

48 www.gemstar.com (23 November 2001)


4. The Actors, Business Structure

4.1. The Actors

A comparison on the traditional book business structure and the new e-book

business structure will show significant differences. The publishers are in a

key position and have to make up their mind about an eventual marketing

and selling of e-books, likewise the authors. Furthermore how will the role

for the lot of manufacturers, suppliers and distributors, not to mention the

dealers which are involved in the traditional book industry, all seeking for a

good deal of the turn over, going to change when e-book hit the market? How

are the retailer and distribution nets going to be formed etc.?

Are the authors and the publishers going to get along in the digital

environment? Is there a need for any other actor in the e-book publishing?

Not really, because the product e-book will be ready for deliverance in just

two steps, the author post his electronic version of the book to the publisher,

who formats the file to a standard e-book edition, makes proofreading, fixing

layouts and does alterations at will. Thereafter the publisher have two

choices: 1) Setting up an on-line bookstore for direct sales to customers or,

2) Start a co-operation with an established on-line bookstore as for example

Amazon.com or BOL.com. The actors can then be counted to three, authors-

publishers-on-line bookstores. The product flow will be much faster and

there will also be great possibilities to cut expenses.

The other side of the business will be to provide e-readers to the market.

This industry sector will be working more or less without connections to the

publishing industry, if satisfying standards can be settled. The large

companies developing and manufacturing electronic devices for home and

professional use will probably not be interested of marketing an e-reader

before the e-book market has been established. This is by the way one of the

reasons to why software e-readers for use on PDA’s, PC’s and laptops has

been developed and now widely distributed for free, to establish an e-book

market. Publishers are aware of this matter and seem to be more open

minded for the solution these software e-readers offering than the closed

proprietary system of Gemstar, which now is considered not to have the

ability to boost the e-book market.


Publishers can and should make even stronger positions within the e-book

business structure as they have the experience of ordinary book publishing

and already have the proprietary rights to almost all of the commercial

copyright protected literature on the market.

But in the future authors will be free to choose if they are going to publish

the book via a publisher or, this is thrilling for the publishers, to do it by

themselves. A well known author might very well bypass the publisher and

post his book to an on-line book store, which placing the e-book in it’s

library and take care of the marketing and selling. One should not however

underestimate the need of proofreading, layout work and marketing etc.49

The fact is that I, myself have tried to display a document of mine in the e-

reader but it was not easy to get a proper layout.

Even if publishers have to face radical changes when they are entering the e-

book market, it is nothing to the outcome of printing facilities and the

infrastructure of deliveries and regular bookstores must face. The e-book is a

real long-term threat to their very existence. Some changes will be more or

less automatically done as the need of printing facilities no longer appears

and as distributors for the electronic literature likewise are not needed, there

are no physical copies to deliver!

In the relation authors-publishers the issue of royalty agreements must be

focused, which is done later on. Such agreements are giving the basic

economic rights to the publishers, which are the ones who actually take the

economic risks of a failure. If the publishers decide to go for the e-book, it is

my opinion that the e-book concept sooner or later will be a reality not only

for enthusiasts as a niche product. But if they choose to leave the thought of

electronic publishing to rest, the way might be open for other actors, or is it

anyway?

Hereunder are some of the most active actors in e-book business listed.

Franklin Electronic Publishers, Inc

Franklin introduced a handheld e-book in 1986 and the company has

been exploiting the potential of e-books up to date. Franklin has created

49 Jerker Fransson, at Swedish Publishers Association, interview in November 1999.


an e-reader with a proprietary OS, which has open but at the same time

secure architecture. Franklin is also offering e-books to a wide audience

by making them available for any open platform. The company has also

opened an e-book store where readers can come to find a wide range of

titles. Their focus is to make electronic reading established.

Gemstar Inc.

Gemstar has acquired the two e-book business company pioneers

NuvoMedia and SoftBook Press and licensed the right of manufacturing

and marketing to RCA, which in turn contracted Thomson Home

Electronics for R&D and manufacturing. Two new e-reader models were

released in 2001, with some small enhancement but in all based on the e-

readers from NuvoMedia and SoftBook. This does a replacement of the

trademarks Rocket e-Book and SoftBook only so natural. The RCA brand

names now used in the marketing are Gemstar eBook REB1100 and

REB1200.

Gemstar withhold a lower profile on the e-book market than the merged

companies did. Gemstar inherited by the acquirement an e-book dedicated

Internet site ebooknet.com, which were a co-operative project between

parties in the e-book business, where NuvoMedia and Softbook Press were

the most active participants. Gemstar were in the spring of 2001 about to

shout down the best source of e-book business related information on the

Internet. The site has probably worked well as one among other catalysts

for the e-book market but Gemstar was judging that the role for

ebooknet.com was a thing of the past.

Other e-reader Developers

NuvoMedia, SoftBook Press, EveryBook, Librius.com and Glassbook where

all parties of the mid 90’s, e-book industry. Their efforts have led to an

uprising interest for electronic publishing. All of these companies

developed and released prototypes of e-readers but in so far only

NuvoMedia and SoftBook Press have managed to put their models on the

market. These two successful companies are however paradoxically not at

the market anymore. EveryBook has chosen to license the right of

manufacturing and marketing of their e-reader to N-vision Technologies,

but the result of this co-operation has not shown yet. Librius.com and


Glassbook have withdrawn their prototypes and do not take any active

part in the e-reader development. Librius.com, which had the Millennium

Reader prototype released when company’s C.E.O. expressed the same

belief as many others in the business and immediately stopped further

engagement. ”The niche products will not last, we’ll se a device managing

all our portable electronic needs”.50 Glassbook has in an attempt to attract

customers been converting literature to suit their e-reader software, which

provides a system allowing you to manage purchasing and reading from a

computer. The system has been subject to discussions in the Electronic

Book Exchange working Group, which was organised on the initiative of

Glassbook, where a specification draft for copyright protection and

distribution of e-book material was launched. This company has also

worked on the launch of an e-reader platform, but is now a part of Adobe

as it became the object of a by up affair.

Adobe

Adobe represents the software business idea of electronic reading. Adobe

acquired the e-book ideas of Glassbook late in 2000 and implemented

these solutions into Adobes system for e-commerce of digital copyrighted

text files. By this Adobe gained access to the submitted standard, OEB.

Before this acquirement Adobe relayed solely in their proprietary format,

PDF. Adobe was also in the early stage of e-book industry, collaborating

with EveryBook, as this company preferred the PDF format and invited

Adobe to a co-operation. Adobe with experience from the publishing

industry will provide publishers with tools covering all areas of e-book

business, from creation of e-books and the managing of IP rights on to

deliverance’s from on-line bookstores.

Microsoft

Software developer Microsoft also believes that electronic publishing holds

the future reading experience on hand. Microsoft reader was issued in

autumn 2000. Windows-based PCs and laptops and Pocket PC 2002

PDA’s support Microsoft Reader. The single Microsoft Reader can be

activated on up to four devices and this means flexibility. Texts that are

published in the Microsoft Reader format, which require less space than

50 http://www.librius.com/, 21 March 2000


the same titles in other formats gives likewise an advantage. The

ClearType display technology that makes text on screen crisper and easier

to read is developed by Microsoft to give their software e-reader better

readability. Features including highlighting, bookmarks and note taking

and drawing, which means pretty much the same abilities that are found

on the hardware e-reader alternatives. One can also create e-books from

Microsoft Word documents using an improved Read in Microsoft Reader,

which is an add-in for Microsoft Word 2002 or Microsoft Word 2000.

Palm Inc. and Mobipocket

Both companies convert texts to be read on PDA’s and other portable

devices. Offering daily subscriptions of newspapers and full text e-books.

Mobipocket.com SA is a French company incorporated in March 2000.

Mobipocket.com provides a universal software e-reader for PDA’s. The

Mobipocket software package, which consists in publishing and reading

tools dedicated to PDA devices with the Windows CE, Palm OS and Psion,

Pocket PC OS, is freely downloadable.

Palm Inc. a pioneer in the field of mobile and wireless Internet solutions

and a leading provider of handheld computers has by acquiring Peanut

Press in 2001, gained access to e-book publishing. The strategy is to

deliver end-to-end handheld computing solutions seems to enable the

company to expand the use of e-books by consumers and mobile

professionals and in the largely untapped education space.

EBJ

E book Japan has focused on the "Evolution of Reading". According to EBJ,

they have explored the possibilities of e-books in publishing companies and

manufacturing companies. EBJ aims to create and distribute the next

generation of e-books, which provide more of a multimedia experience.

Further on it seems that EBJ takes a broad perspective on the whole

commercial idea of e-books. They will propose new methods of distribution

and transactions by adopting original compression and encryption

technologies.

In collaboration with terminal manufacturers, who would create the next

generation PDA, we plan to offer the next generation of reading experience,


such as developing comfortable reading devices. The EBJ is a consortium

with great commercial strength so their effort will be interesting to follow up.

4.2. Co-operation

No business alone is capable of succeeding with the manufacturing,

marketing and selling the e-reader and also manage to supply readers with

e-books. In the start up period it has been the only solution for the e-book

business as NuvoMedia and SoftBook Press to do so, but as the market

expands it will be impossible to meet demands arising. Authors and

publishers have to be involved as well as established on-line bookstores.

The issues will not only involve co-operation. We will surely see companies

within the home electronic supplies market to manufacture and market

some sort of e-reader in a couple of years. The e-book market will thereby be

divided in two. First the electronic e-reader devices market and second the

publishing industry itself.

We can here take a quick look at the standpoint of a couple of e-book market

actors of today. Gemstar welcomes publishers who want to sell books

through our standard-setting secure distribution system. They intend to

work with virtually every publisher to provide quality books to the Gemstar

e-readers. Partners are invited if they are the owners of the electronic rights

to the work, publish book length manuscripts and are able to offer an initial

minimum of twenty titles for distribution. They must also be capable to

deliver content files formatted for the Gemstar e-Book platforms and actively

promote the availability of their titles as Gemstar e-Book editions. Gemstar

also invites technology providers, manufacturers and device retailers for co-

operation.

In Sweden eLib has a much more open attitude and do not require

exclusivity. The simplicity of their model must be judged an exemplary. They

ask for an email with the book saved as a data-file. Their price for converting

the file to a preferred e-book edition is about 2500 Swedish crowns with

listed quantity discounts. eLib also asking for the price they have to pay for

each sold copy, to set proper pricing to customers. They then place the e-

book on their download server.51

51 www.elib.se


For the e-book commerce eLib has a strategic co-operation with Microsoft,

which has the purpose to develop solutions for secured distribution of e-

books. Microsoft’s consumer portal MSN has a part in this e-book project.

One of the issues that are prioritised is to build a network of retail dealers.

The first place where to buy an e-book from eLib was Adlibris.52

Other companies which eLib has established co-operation with are

publishers like Natur och Kultur, Piratförlaget, Studentlitteratur, ePan,

Pagina and others.

4.3. Differences in the Traditional and the Electronic Publishing

Business Structures

4.3.1. Real Changes

Changes of the business structure that is possible in the matter of e-book

publishing are expected to be rather radical compared to the traditional book

business. But even if several parties in the manufacturing chain of

traditional books are out of participation when it comes to e-books there are

others who might join the staff. So it is not to be assumed that the e-book

will concern only authors and publishers. The short-term changes of

publishing industry in the electronic environment has technological and

practical explanations as the need of printing facilities is out and that there

are no physical goods to deliver. The long time effects on publishing industry

are not that obvious.

4.3.2. Possible Changes

What changes to expect in a longer perspective then? Strictly one can say

that when the standards are set and technology solutions for e-book

publishing are spread the parties involved can be as few as three, the

author, the publisher and the on-line bookstore.

But in the future authors will be free to choose if they are going to publish

the book via a publisher or, this is thrilling for the publishers, to do it by

themselves. The need of publishers could therefore be questioned. There are

already tools freely available, that converts the most common computer

documents to the proposed standard e-book format. A well known author

might very well bypass the publisher and post his book to an on-line book

52 www.adlibris.se


store, which placing the e-book in it’s library and take care of the marketing

and selling.

Even if publishers have to face radical changes when they are entering the e-

book market, it is nothing to the outcome of printing facilities and the

infrastructure of deliveries and regular bookstores must face. The e-book is a

real long-term threat to their very existence.


5. Strategic Law Management Issues

5.1. Introduction

Upon the launch of an e-book business there are several issues arising from

the demand of knowledge, or at least the wish to have an ability to make

reasonable correct predictions of the response from different actors on this

new market. By this I mean like how competitors, customers, authorities and

eventual partners are dealing with the e-book concept.

Hereunder I will give some essential information on strategic law management

and to them attached issues and then pass some ideas of practical interest if

going for e-book publishing. The matters have been described above from the

view of current market players and their positioning, but now it is about time

for a closer look at some of the topics, which may imply some problems for

these and all new market actors.

5.2. Launching the e-book in Sweden

What about publishing e-books in Sweden? Well, Swedish is a rather small

language and so is the Swedish market for literary works. Reading is falling;

there are a lot of competitive interests in today’s society. Why should the e-

book in this perspective become an economic success or even marketable. In

the long run, I think, that the traditional book will be on the marginal. And

the IT developments see to that we can gather information both for

amusement and work even faster via Internet or any similar alternative

network.

At the present there are also problems with standards and incompatible

technologies, as we have seen. If an author or publisher choose an e-book

format to use with an e-reader they will be stuck with that specific format

and that e-reader. However in a near future, the author may be able to

formatting text into a standard e-book edition, post it to some online e-

bookstores, and start collecting royalties. The standard e-book edition

should be able to read both from e-readers and PC’s as well as PDA’s.

Publishers in Sweden might face problems with profit due to the market size,

though.53 This among other reasons holds them from investments on the e-

book concept right now. The demand is not obvious.54 Publishers with text

53 Jerker Fransson at Swedish Publishers Association, interview in November 199954 Marketing manager at BOL Sweden, interview in March 2000.


material for students and professionals seem to have given the idea of e-book

the most serious thoughts. It is not very surprising. As I wrote above, the

primary market target groups are likely to be the ones mentioned. Poor

profits will give incitement to lower royalty rates on the contrary to the

expected, at least initially. But with larger volumes there ought to be great

possibilities for authors to get better off, as a number of costs for the

publishers are being greatly reduced thanks to the e-book.

This is one of the main differences to the US market. With some 280 millions

inhabitants there is a chance to make money even on a relatively small niche

product as the e-book at this stage appear to be.

5.3. Technology and the Standards

5.3.1. Technology Solutions

This section makes a short comment on the use of general-purpose devices

such as Windows CE-based hand-held devices for storing and reading digital

titles facing the dedicated e-reader devices.

The widespread use of general-purpose devices has created a large market

with several innovative ways for which they can be used. For example, e-

book solutions are available now and may become more popular in the

future. For a potential content distributor, the most inviting difference

between a system using a general-purpose device is the ability to avoid one

of the major obstacles, to get devices into the hands of potential users.

Likewise any potential content delivery system that can leverage an existing

delivery platform must be preferred but can incur some disadvantages. Some

of the benefits to a general-purpose device solution to content delivery are

that these devices, computers if pleading for software readers, are already

widely used and therefore easy to use for customers.

Software enhancements can be easily improved and tested using general-

purpose development tools. As security measures are important, known

encryption algorithms can be employed to ensure secure delivery to the

device and any future security infrastructure standards can be adopted as

they become available

While some of the more inconvenient things are that a general-purpose

device is not optimized to read e-books from and the lack of a closed secure


system can mean loss of IPR’s. There is simply no existing security

infrastructure to ensure secure managing today

Can these problems concerning open platform solutions be solved? One has

to have in mind that they are meant to be open and extensible systems just

so that users can modify and extend them to match their needs.

The tradeoff between the fragility and the strength of these platforms is an

issue for e-book developers and the publishers. While the risks of releasing

content to these general-purpose platforms are higher, the availability of

these devices may drive the demand for content availability and thereby an

increasing e-book reading. This must clearly be a managerial issue, to

estimate opportunity contra risk.

5.3.2. An Outline on Strategic Standardisation Issues 55

Background

Why are the standardisation issues of importance for the IT business? When

a company issues a new proprietary technology struggling to get a foothold,

it often tries to make its own solution the industry standard, while others

also comes up with competitive solutions on the market. Sooner or later

however, all of the competitors in a market niche such as for instance the e-

book or the dedicated e-reader for reading of digitally published texts are

forced to acknowledge that co-operation are the key in a mass-market

creation. Consumers would not buy devices that lack interoperability with

other products in the same category. The increasing internationalisation in

commerce and the aim at creating those mass-markets also means that

standards must be worldwide known to reach the intended effect.

Standardisation actually has a strategic dimension for the business, which is

based upon the economic relevance of standards in both the geographic and

product market.

Though standards are not regulated by law, the connection with the laws

on IPR and Competition areas together with commercial aspects, makes

the issue important for the business actors of today's IT community.

Therefore a discussion on standards are relevant to us.

Standards

55 The outline on standards is inspired by Sofi Nyström, Standards, a Survey.


What is a standard? A standard can be defined as a "document, established

by consensus and approved by a recognised body, that provides, for common

and repeated use, rules, guidelines or characteristics for activities or their

results, aimed at the achievement of the optimum degree of order in a given

context." 56

All around us we recognise things that whether we know it or not are

assembled in correlation to a standard. Standards have been created for a

great variety of matters like measurements, production methods, electricity,

health and medicine or even computer communication, in one way or

another.

To pick an example from the field of home electronics: All VHS videotapes,

for example, work in all VCRs. One earlier competing technology, Beta, has

vanished long time ago. However now the VHS is about to be outmoded and

that standard has no or less importance anymore. The DVD is now judged to

be the leading digital content media, but for how long? The Internet can

without doubt be a hard competitor as it supports deliveries without a

physical information bearer. Streaming technology, which means that a file

of digital content is being sent in real-time trough the network to the

recipient, whom experiencing the file as music or a movie, allows direct

delivery but only insofar there is provided fast and secure Internet

connections the quality will be satisfying. We understand by this that

standards is needed, standards is being outmoded, standards will face faster

lead-times but standards can also mean that some technologies even if they

are working as well as or better than the standardised technology, has no or

less commercial value. Who wants to issue the next "beta player"!

A standard may be a voluntary agreement made in consensus by experts

from manufacturers, authorities and other interested parties, authorities as

a reference in legislation, but when the requirements in the standard

settlement becomes compulsory, it automatically forces parties into the use

of certain technology. Three ways of standards development can be

discerned.57

First the formal standards, which traditionally have been developed within

recognised standards bodies. Which is established on both national levels, as

56 ISO/IEC Guide 2:1996


in Sweden where SRS, Swedish Standards Council, is the central body for

standardisation. Thereunder are three branch organisations: ITS

representing telecom and IT, SEK representing the electrotechnical area and

SIS which represents a number of organisations. On an international level

the most recognised standards body is The International Organisation for

Standardisation, ISO, which comprises 125 national standardisation

organisations and the central body of all standardisation areas.58 It has a

broad focus on standardisation issues and areas. Concerning the IT branch

the most important organisations are ETSI and JTC1. The standards body of

the same standing as ISO on a European level is CEN, the European

Committee for Standardisation. SRS is the Swedish representative in both

ISO and CEN, so there are in fact a hierarchic organised standards network.

How does a formal international standard normally develop? There are six

stages in the standards evolution process within the ISO.59 First there is a

proposal stage, where a need of a particular international standard is

confirmed. A new work item proposal is submitted for vote by the relevant

member organisations, to determine the extent of the work. The proposal is

set for a voting and will then be accepted or declined. Second there is a

preparatory stage, which usually initiates by the establishment of a working

group, for the preparation of a working draft. When the group reaches a draft

that is considered a satisfying technical solution to the problem being

addressed, the draft is forwarded to the parent committee for the phase of

building up a consensus. This follows by a committee stage. As soon as a

first committee draft is available, the ISO Central Secretariat registers it. It is

distributed for comments and, if required a new voting round. Successive

committee drafts may then be considered until consensus is reached on the

technical content. A draft International Standard is issued. Therewith an

enquiry stage is entered. The draft is circulated to all ISO member bodies for

voting and comment within a period of five months. It is then approved for

submission as a final draft International Standard. The fifth stage facilitates

the final draft International Standards approval. If technical comments are

received during this period, they are no longer considered at this stage, but

registered for consideration during a future revision of the International

57 Sofi Nyström, Standards a Survey, page 7ff58 www.iso.ch (19 November 2001)59 The process description is based on the ISO/IEC Directives, Part 1.


Standard. In the last stage ISO Central Secretariat publishes the final text of

an International Standard.

The responsible Technical Committee or Subcommittee reviews all

International Standards at least once every five years. Then they issue a

conclusion leading to that the standard is confirmed, revised or withdrawn.

Second there are the De facto standards, which are developed within

industrial fora or consortia. The number of standards descended from fora or

consortia has increased substantially over the last years due to their ability

to speed up the standardisation process and respond to the market need of

direct participation from the industry. As an example the earlier described

NIST initiative on OEB forum may serve well.

At last the proprietary standards has been recognised arising spontaneously

by the degree of penetration of the market of a particular technical solution,

which might as well be the solution of a market leader in a relatively new

and delimited market. From the business position the question is not

whether the standard is a formal or a de facto standard that is essential. It is

to get the standard set, so that a frame for product and market areas is

provided and uncertainty can be avoided.

Communication- and information technology sectors have seen

standardisation issues mounting from their basic functions where they

earlier were an instrument of rationalisation within companies to an

important brick in the commercialisation act. This specially goes for the

IT business sector, which has created a new structure in the

standardisation world by collaborating in fora and consortia. The main

reason is the need for faster lead-time developing standards and direct

participation for the industry to monitor the outcome. At first the old

structure with formal standard bodies was unable to meet the new

demands.60 Now the two worlds merge.

Impacts on international Trade

In the international marketplace, standards developed through voluntary

processes are desirable since they represent a broad-based consensus of all

interested parties. Nations that actively participate in developing

international standards may be able to influence the provisions to favour


their own products or those that they prefer for some reason. Traditionally,

the level of industrialisation, the political and legal system, and other factors

shape national standardisation policies and activities. Since trading

countries competing in the global marketplace are exploiting every

opportunity to favour these products through the standards development

process, it seems urgent for any market actor to lobby before the national

standardisation bodies and governments if the intention is to maintain

existing trade outlets and find new markets.

As the international trade has become an increasingly important factor in

the growth of the world economy, nations are forced to consider its impact.

It is a world in which the design, manufacturing, marketing, and customer

service operation of a growing majority of individual enterprises are

distributed across many countries; and a world in which electronic

communications have dramatically increased technical collaboration

between experts in academia, governments, and industries from all

countries. No nation can afford to be isolated.

The objective of international standardisation and related activities is to

facilitate the exchange of goods and services at the international level and to

promote co-operation in the areas affected by international standards.

The negotiation and adoption of technical standards for all classes of

products and services takes on many roles in the global arena. These roles

can lead to formation of economic and political coalitions among nations and

regions, market segmentation among major producers, and even social

change among different cultures. National and regional groups have

sometimes conflict of interests, and they can intervene or use regulations

and standards for political purposes.

This is particularly true with respect to new technologies. Standards can be

invoked to act as non-tariff barriers, protecting one country’s industry or

new technology from other countries. To segment markets, governments can

effectively manipulate differences in technical standards.

In this perspective of international trade it is not only the standardisation

bodies at different levels influencing the standards development. The World

Trade Organisation is also involved by the "Agreement on Technical Barriers

60 ISO strategy on the IT use in an accelerated standardisation process. www.iso.ch (21 October 2001)


to Trade". The provisions of this agreement and the Code of Good Practice for

the Adoption, Application and Preparation of Standards have important

implications for ISO and IEC member bodies. The key provisions are about

technical regulations, standards, conformity assessment practices,

notification requirements, and standards developing bodies.61 Much of the

regulations in fact are intended to hinder such measurements of protective

purpose, mentioned in the previous paragraph.

These are facts that the business actor of today has to face and understand.

However for the single company it will be extremely hard to change the

outcome in any global standardisation issue. These aspects on standards

explain why some comments on unfair competition and intellectual property

rights laws are made hereunder.

Strategic Considerations on Standards

As the role of standards are very complex, a strategically view will be added

in this work. A standard represents a level of know-how and technology,

which presence renders the industry to an indispensable preparation. A

standard is not neutral. Nowadays it often even contains at least partly of

some proprietary technology.

The reference document of the standard is used in the context of

international trade and on which the majority of commercial contracts rely.

It is used in the commercial society as an indisputable reference, facilitating

and making the contractual relations between economic partners clear.

For the business actors, the standard also is considered a factor for

rationalisation of production and to aid definition and reduction of

uncertainties in the effort to determine the needs of a market. The standard

is thereby a component that catalyses innovation and development of

products. Because when participating in standardisation work the parties

involved be enabled to anticipate the future product market and therefore to

make their own products advance simultaneously. Standards play an

agreeable role for innovation thanks to transferral of knowledge and new

technologies. By this standardisation facilitates and accelerates technologies

in fields that are essential for both companies and individuals such as new

61 www.wto.org, (3 October 2001)


materials, information systems, biotechnology, electronics, computer-

integrated manufacturing etc.

A standard involves the possibility for strategic choices for a company. To

participate in standardisation work discloses an introduction of solutions

adapted to the competence of the own company and equipping oneself to

compete within competitive economic environments. It signifies acting on

standardisation, not making it constant. If Standardisation is a strategic

business issue what has then to be considered?

Even if the purpose of developing a standard is to gain market acceptance

and to make the proprietary technology a commercial success, it is not

always the right way to go. For instance unprotected IPR’s should not be

reviled in a standards working-group. Because the company’s IPR standing

and its great relevance to standardisation, a discussion of the relation

between standards and the IPR will follow.

Six strategic decisions62

The following arguments on strategic decisions to be made by the business

actor in a standards concept formation are important in the long-term

perspective.

First the choice of forum for any involvement in the standards development

process will have wide broad consequences. The choice between the formal

bodies of standardisation and fora or consortia co-operation often nowadays

in the IT sector be the fora or consortia alternative. Ingredients that have

determinate effect are among others the size of the company and the market

share. However the single matter with greatest significance to be considered

is the nature of the market in which the business is active. If it is a rapidly

growing new market like in the case of the e-book, which is part of the IT

sector, the company might consider joining an independent forum instead of

a formal standards body. The e-book business has in the early stage of the

markets development joined the OEB for instance, even though this forum

was initiated by NIST it is a branch forum. If a forum offers a collective task

on a technology solution, which is used by a business actor, participation is

a way of keeping development issues updated. It also gives an opportunity to

monitor the competitors, as well as to influence the technology progress.

62 S Nyström, page 36ff


In a fora or consortia standards working group the direct participation is a

fundamental presumption, while in the formal standard bodies the company

is represented by a national representative, sent out to express the

consensus view of the organisation. The business actor will then depend on

successful lobbying. The prospect of influencing the process must be judged

much better in the fora.

"A choice will have to be made regarding what areas are to be given priority

for standardisation, e.g. a certain product or a certain technology".63

A second opinion concerns the competition situation in the business. This

can be estimated by studying the market. Is the market divided between a

few large companies or many small companies, who each have a share of the

market, or does one large manufacturer dominate the market and some

small business actors maybe offering niche products. For the e-book

business it is obvious that we will have a great amount of publishers at the

market, but there are probably just a few actors that may provide the

hardware based solutions. The conditions of the product market are split,

which means that publishers and hardware/software suppliers not faces the

same problems. The active fora and standardisation bodies have

concentrated upon the adoption of e-book in public. Therefore many actors

will gain on collaboration at this early stage of the e-book market. It is likely

that some business actors gained market shares by participating in

standardisation bodies. An example of this open collaboration intended to

catalyse an e-book market in Sweden is that of the joint creation of the

company eLib, a project described earlier.

Next question is about active or passive participation in the standards work.

Is a contribution to the standard making process to the benefit for the single

company or is the best choice just to use a settled standard.

The active part in creating standards will need time and commitment from

experts and executives within the company. This may show hard if there are

limited resources in the company both financially and personally, where

people who might be needed to run the research department on a daily basis

also are the ones who could participate in a standards workgroup. To buy

standards draft specifications and adapt the production to them can be the

63 S Nystöm, page 37


best alternative for the smaller business actor. This way the company will

benefit from a standard developed by others, but on the other hand no

possibility to influence the future product development and the direction of

the market is given. To represent the company in standards workgroups it

takes knowledge and awareness in matters of a wide array. The delegate

should:

"Have a well specified mandate for negotiations and a good knowledge of

internal time and cost limits for the product development. He or she will

have to be well aware of his company's position on IPR issues and must have

a good insight into the mechanisms of standardisation. An ability to

understand other delegates and their objectives is also required as well as a

capability to convince other delegates. In other words, what is needed is good

social competence".64

The timing of any active participation in a standards workgroup is the fourth

issue of importance in this viewpoint. If the research has reached a stage

where it is ready for commercialisation it probable be judged too late to join

a standards forum, at the risk that the products may be out outdated.

Publishers in the e-book business have reached the point where any

thoughts of new standards formation seem meaningless. The focus must be

set on to work with the tools given by the e-book standards specification

issued by the OEB. To get a widespread acknowledge for the standard and to

facilitate its growth in order to increase the commercial value of the standard

the e-book business could as a suggestion go on and get a formal standard.

A formal ISO standard can be issued within two years, via the so-called fast

track process, described in the directives of JTC1.

With the importance of standards in mind, companies have to develop a

standards strategy, which needs to be drawn up at the same time as the

product development is planned. In the e-book business the relatively early

adoption of a content format has helped the business to the next level.

The business integration of the standardisation issues should be done in co-

ordination with the planning, development and information flow of the

company.65 This is corresponding well to the commercial weight standards

issues nowadays have.

64 S Nyström, page 37


Finally some words about the relation between de facto- and proprietary

standards. The most favourable strategy has to be the one where a company

can make their own technology solution a de facto standard without having

to participate in any forum. This is however mostly out of reach. It requires a

unique product, so superior that any alternative must be rejected. And it will

also require financial strength to make a commercial success with large

investments in marketing. These requirements are not present at any level in

the e-book business so the market is still like an open unfinished book.

Strategies are always individually formed. Standards strategies make no

exception, one strategy formation will not be suitable to all companies and

all situations. Standards strategy is a management issue, with all its

implications and there are many critical choices to be made. One thing is

remarkable definite, without considerations on standards issues a lot can go

wrong.

Conflict of interests, 1: IPR Contra Standards

”Standard development is at the centre of the fundamental conflict between

the unique and the uniform. Patents are one way to value the unique;

standards are the means to define the uniform. IPR’s are tools to create a

market while standards are used for creating the marketplace”.66

This must actually be considered as one major conflict of interest. In a

matter of sense IPR’s is about protecting individual interests but on the

other hand a standard is about creating common rules on product

commercialisation to the benefit of all society. Standards development

parties must therefore ”balance the cost - the desire for economic gain to the

patent owner offered by the use of essential patents in a standard, which

means that typically a license is required for use, with the ”benefit” – their

goal of quickly completing state-of-the art standards”.67

Today many organisations, both creating formal and de facto standards have

implemented policies on how to handle IPR’s in the development of

standards. Currently, consensus-based standards organisations use a

doctrine requiring that patent holders offer to license their inventions on

”reasonable, fair and non-discriminatory” terms. This has the disadvantage

65 S Nyström, page 3866 K Krechmer, page 167 K Krechmer, page 1


of reducing the maximum royalties that an inventor can receive but on the

other hand it defines that the invention will be available to multiple

developers.68

For the owners of such rights, who are commercialising their products, it is

vital to gain market acceptance and get a profit from their investment in

research and development.

Conflict of interests, 2: Anti-trust Law Contra Standards

Normally a united action between companies is regulated and can be banned

as unfair in competition laws within most of the world’s nations. Legislative

work in the area is done with the goal to ensure the functions of the market

economy, where competition is supposed to gain consumers and product

development. But the standardisation bodies can offer a sort of legal cartel to

their participants though general standard-agreements can interfere with

unfair competition law, which means that competition between companies is

delimited.

In short this means that an agreement between companies which: Fix

purchase or selling prices or other trading conditions, limit or control

production, markets, technical development or investment, share markets or

sources of supply, apply dissimilar conditions to equivalent transactions

with other trading partners, thereby placing them at a competitive

disadvantage and tying clauses demanding the other party to accept

supplementary obligations are prohibited.69 Anti-trust legislation in the US

also recognises these problems.

However exemptions is made insofar agreements which composition

normally should have them prohibited, if they contributes to improving the

production or distribution of goods, or to promoting technical or economic

progress, while allowing the consumers a fair share of the assumed

beneficial result.70

68 K Krechmer, page 569 For example the Swedish konkurrenslag, (KL), 6 §. See also for a comparison art. 81.1 of the EC Treaty.70 KL 8 §. See also for a comparison 81.3 EC Treaty


Further exemptions are made to allow agreements on for example licensing

of patents and know-how and agreements on R&D. Agreements as such

must meet certain conditions to be approved, though.71

Another angle to the anti-trust/competition legislation is the one to prevent

market monopolies to develop. Companies that dominate their market in an

abusive way may hinder competition and thus considered having a monopoly

position.72 The advantage of possessing IPR’s may contemplate domination in

relation to competitors, but the way laws regulate the rights, the mere

possession does not imply a prohibited dominant situation. In the US,

standardisation organisations like the NCITS are well aware of the strict

regulations on antitrust matters in the US. In order to protect its members

from violating antitrust legislation, the NCITS has developed guidelines.73 By

considering what those guidelines states, one assures the own company to

not commit unintentional violations on anti-trust laws.

5.4. Information Technology Law

5.4.1. An introduction

As new phenomenons are previously unregulated the inventors, developers

and people who may commercialise a new idea has to make some

considerations of how their concept is going to be received by different parties.

The authorities in this case have responsibility for the legislative work. I will

hereunder try to describe some specific legal areas with impact on the E-book.

To delimit these areas I have chosen to make a brief presentation of the scoop

of IT law. Is there a legal area that actually can be called IT-law?

The use of IT is increasing and we can not yet imagine were the technology

development will lead us. In this dynamic environment the legal instruments

sometimes apparently are insufficient and new or rewritten laws and

regulations are demanded. Within the field of IT this is important to follow

the progress with even greater consciousness.

Authorities are trying to keep up with the progress but there are gaps, and

always will be, between the written and practised law as the society’s

allowance of certain new behaviours continuously undergoes changes. This

71 Please refer to EC commission decrees, EEG num. 2349/84, 417/85, 418/85, 556/89…72 See for example KL 19 §. Compare to EC Treaty article 82.73 http://www.ncits.org/natrust.htm, (9 November 2001)


acceptance is necessary or else we would live in a static world giving the

individuals little space to live their own lives. One can’t forbid new behaviour

patterns just because they are not earlier practised.

Ian Lloyd doubts that the Middle Ages thought, ”Knowledge, of itself, is

power”.74, is correct. Is it not more correct to speak about the access to

information and that information is power? Education, for example, is about

accessing information to support the learning process. The conclusion of this

must be that information by nature is good. The e-book may be seen as an

information source suitable for education by its fast access to various

information services, like the on-line bookstores, using the latest technology.

The flow of information in today’s society accelerates in an ever-ending

stream. The main explanations are the development of the personal

computer and the growth of the Internet, which has made the IT-society

flourishing. IT is however implicating some consequences which not

necessarily is that good. These have been and are or going to be objects of

legislative work. Legislation on the IT area may be divided in two: First,

legislation of the IT society and second, legislation for the IT society.75

According to this scheme legal matters concerning privacy and data

protection but also computer crime is to be seen as regulation of the IT

society. The purpose is for the authorities to gain control over activities

related to, primarily, computer networks based information. Some of these

activities may be of criminal character, for example, misuse of the right to

personal integrity and infringements on copyright protected works. Internet

is the single most significant computer network in the world. The number of

connected computers are about 163 millions, worldwide,76 (number raises

quickly) with no physical boundaries separating the users in the cyberspace.

One can easily navigate through the massive resources of the Internet using

the WWW. The e-book reader may for example surf to an on-line bookstore

and download the latest best seller. But this enormous amount of users from

all around the world is not only for the benefit of information services

available on the Internet. With the anonymous appearance on the Internet

and the current problems of tracing down law-breakers and getting a verdict

74 Ian Lloyd, Information Technology Law, p. xxxv75 Ian Lloyd, Information Technology Law, p. xl76 http://www.cyberatlas.com, march 2000


to punish criminal offences, some users do not pay attention to the

applicable laws. They do instead look forward to a possibility of making easy

money by, inter alia, fraud or copyright thefts.

Hundreds, thousands and up to millions of computers may share the

information sent to and through the Internet and similar networks. When

sending information over the network one have to rely on the protective

measures taken by the ISP one have contracted, not to forget the safety level

of the users own system. If the technological solutions of defence fail there

must also be a legal protection that manages to keep criminal behaviour on

the margin. This gives birth to the need of data protection. Information

concerning personal data as financial, medical, educational and employment

status may be stored on a server in a network, it may also be stored at

several different servers and then put together by anyone with access to

these if wanting to get the full picture of a persons standing. This

information can be misused, and the right to privacy is thereby threatened.

Furthermore it is clearly that criminal statues must regulate the misuse of

information.

To follow the scheme let us now take a look at the regulation for the IT

society. If criminal statues protect the right to privacy and gives data

protection, then the protection of economic interests must be built on the

Civil Code Law. There are a couple of cornerstones in the legislation that are

of importance to us. First we have the IPR, which is the main instrument to

protect various outputs of intellectual work. The society throughout the

world has recognised the need of a legal protection for the result of such

work, whether it concerns science, design or literacy. Second, there is a need

to regulate the commerce on the Internet.

When it comes to protect technological advances we have the legal patent

system, to some extent internationalised by Geneva Convention and the PCT.

Also within the EU, individuals and companies can file for a European

patent, according to EPC. We also have a worldwide need of protection for

ideas, a right given to people over the creations of their minds. This is

recognised as the copyright, a right that by the way has been subject to

protection since almost three hundred years within parts of Europe.77 The

last IPR of interest to us be the trademark. As the commerce is becoming


more intense and more internationalised it has been even more valuable to

be in possession of a strong well-known trademark than the value of the

product. Where or by whom the product is manufactured are of lesser

importance. What is important is that the product has the qualities that

match the trademark or brand name values it is marketed under.

When it comes to electronic commerce there are a lot of issues that has to be

considered by the salesman with intention to sell goods over the Internet.

Legal matters that are actualised by the use of IT is not brand new but there

is maybe a need of redefining some of the rulings so that they can be applied

to, in the field of electronic information. These areas of law has as shown an

immense bearing towards the information flow within computer and telecom

networks and may be named IT-law, when as here adapted to the digital

world of computers and digital telecom services.

5.4.2. Intellectual property rights in the digital world

Intellectual property rights provide an incentive for the creation of and

investment in new works of prints, software, broadcasts, etc. and their

exploitation.

Thereby we will see new innovations, improved competitiveness and

employment. The IPR is a critical issue in the digital world as the

information, and thereby knowledge, spreads wider and a lot faster in the

electronic outline.

A product like the e-book, which is dependent on digital technology, is also

vulnerable to different sorts of intellectual property infringements and

piracy. Therefore the area must be discussed thoroughly.

Ideas and knowledge has more and more become an important part of trade.

Most of the value in a modern product lies in the amount of efforts like

invention; innovation, research, design and testing involved. Books,

computer software and on-line services are bought and sold because of the

information and creativity they contain, not usually because of the material

used to make them. Products that traditionally has been traded as low-

technology goods or commodities can now comprise a higher proportion of

invention or design in their value, for example brand named goods. In these

cases the trademark has become synonymous with a definite value.

77 U Bernitz (with co-authors), Immaterialrätt, page 5


Creators can be given the right to prevent others from using their inventions,

designs, literacy works or other creations. These rights are known as

intellectual property rights. Products in the form of books, paintings and

films comes under copyright protection, inventions can be patented, brand

names and product logos can be registered as trademarks. Companies are

also entitled to the exclusive right of their firms’ name by registration, in

Sweden to pick an example according to Firmalagen (FirmL).

Moreover, the field of IPR is associated with important cultural, social and

technological aspects; all of these have to be taken into account in the

shaping of a policy in this field.

There has been significant harmonisation in the IPR area to brake down

barriers to trade and to adjust the horizon to new forms of exploitation. The

task for the IT community must be to enforce this "feeling of conformity"; to

complete, renew and adapt it to new developments in technology areas and

the markets concerned. The international perspective on intellectual

property can be highlighted by art. 27.2 in the UN’s Universal Declaration of

Human Rights. ”Everyone has the right to the protection of the moral and

material interests resulting from any scientific, literary or artistic production

of which he is the author”.

As the importance of IPR must be obvious, likewise the need of managing

these assets in a strategic view must be.

”For the fiscal year of 1990, Texas Instruments Corp. Reported that its

revenues from patent royalties exceeded its revenues from manufacturing”,

even though Texas Instruments consider itself a manufacturing company. 78

How is that? By sharing patents, copyrights, trademarks and trade secrets

etc. with other companies in the branch by an effective well made IP

program, it is possible to boost the market and demand for the proprietary

products. Managing these rights in a proper manner can be very profitable in

both an economic sense and to the benefit of technological development. A

business actor of today must recognise that the IP can be a good not only in

the physical form, the copy sold to consumers, but also as the immaterial

right. According to Glacier, a company’s intellectual property management

78 S. Glazier, page 1


program should include one or more of the goals he specifies, as strategic

management is the platform of fulfilling any overarching goals.79

1. Gaining protection of the company’s products, services and income.

2. Generating cash by assigning or licensing IPR to others.

3. Obtaining a legitimate monopoly for future exploitation.

4. Gaining protection of R&D investments.

5. Creating bargaining chips.

An explanation to point three is that it’s not always obvious what use a new

invention or discovery can lead to. While exploring any possibility before a

commercialisation, one has to hinder others to use the invention or

discovery. The fifth goal has as purpose to create patent portfolios that can

be used as trading goods, when negotiating cross-licenses in the area of

patents and know-how etc.

There is however no point of gaining patents if no commercial benefit can be

derived from it, because the patent itself only imply costs. After each section

describing respectively copyrights, patents and trademarks some strategic

considerations are issued.

5.4.2.1. Copyright

Introduction

Hereunder are copyright matters obviously attendant in the e-book business. I

will start up to give as a background a few important comments on why e-

book business has to create sustainable strategies for the protection of its

intellectual property, specifically the copyright.

Two technological developments mentioned earlier in the work have raised a

couple of issues regarding the future of intellectual property protection in the

publishing industry. First, the rise of the Internet that has made global data

services available at low cost to the general public. Second, technology

advances in portable electronics have made the e-readers a reality. Together,

these two developments not only reduce the cost of production and

distribution for the publishing industry and other intellectual property based

businesses (that is what makes e-books interesting besides technology

enhancements) but also pose a significant coercion to the publishing

79 S. Glazier, page 2


industry. These technologies may enable pirating and copyright

infringements that threaten the industry in the most serious way. Mass

reproducing is easily done once the copyright protection is cracked and it

could very well imply severe income losses for the copyright owner.

Publishers all over the world have made only limited releases of copyrighted

material of theirs in digital form up to date. This has apparently secured

them from a scenario similar to that now facing the music industry with a

flood of MP3-compressed music that circulates the Internet-based Web. As

the music on a CD already comes in a digital format it easy to convert and

spread worldwide as an MP3 file. Music industry started to distribute

digitally recorded music on CD’s already in the middle of the –80’s. The same

goes for computer software industry, which since the start by necessity

deliver its products in digital form.

It is obvious that the literary creation, when it comes to electronic books, has

the need of a copyright protection near the one developed for computer

software. Copyright cover has to be given in three ways, as I see it. Creation

of both contractual and technological measures added to the legal protection

has to be done; or else it will be almost impossible to manage the IPR in the

digital media world. Computer software has normally a stronger legal

protection than music and books because the combination of these three

safety-measures. Although, these measures has shown not to be enough to

give a really effective protection.

With modern IT media tools it is possible to make perfect copies over and

over again. The circulation through Internets structure is enormous and

traffic will go faster as better network components as broadband cables

enhances connection speed for the lot of users, for the benefit of the average

consumer but for the worse to copyright owners. As faster connection speeds

develops, problems with copyrights and its protection will increase. This may

imply a harmful impact on the economic factors; turnover falls when illegal

copies are sold, profits may go down when trying to meet the illegal market

with price reductions and so on. These new conditions in the digital world

will also be an important derivation for the ongoing legal work on intellectual

property matters.

Hereunder I find it appropriate to first provide a background on the nature of

copyright and to have a quick look at if the Swedish Copyright Act,


Upphovsrättslagen, can meet the demands from those fundamental

characteristics of this immaterial right. Thereafter I will take a look on the

international copyright treaties and highlight a couple of differences from an

international point of view. The protection technology solutions and

contractual agreements will provide has to be considered likewise. Finally

some words about what a copyright policy should comprise.

Copyright and Its National Shaping

Copyright provides the original creators of works and their heirs, certain

basic rights, which can be split up in two categories, the economic and the

so-called moral rights (compare URL 1st chapter §§2 and 3). They hold the

exclusive right to use or authorise others to use the work on agreed terms.

The originator of a work can prohibit or authorise use as reproduction,

public performances or adaptation to altered means of expression. To gain

copyright protection no registration procedures etc. is necessary. Copyright

is thereby a formlessly originated right. This important principle of copyright

has its ground in the Bern Convention.80 There are however a couple of basic

demands on the claim of copyright. Novelty is the first important principle. A

work that already is published can not normally be subject to new claims for

copyright. A second criterion is that a copyrighted work must originate from

the efforts of an intellectual achievement of a physical individual.81

What works is then protected? The core copyright area is to grant protection

to literary and artistic works but there have been developed lots of more or

less closely related phenomenons, making delimitation a bit difficulty. As far

as it concerns the e-book industry, literary works as fiction and textbooks

probably is given the first consideration when it comes to copyright issues.

But there is also a good idea to discuss the eventual protection for computer

software solutions and if it may, or not, be combined with a thriving patent

application.

The Swedish Copyright Act, URL, is stating that protection are given to

among other creations as fiction and textbooks even computer software, URL

1st chapter § 1. These areas are of specific interest to the e-book business.

The fact that computer software is gaining protection as a literary creation

80 Koktvedgaard and Levin, page 5581 U. Bernitz (with co-authors), page 37


shows the wide array of copyrights nature.82 The protection of computer

program is not obvious, the opinion has suggested the patent system as the

more natural way of protecting computer programmes.83

A great number of creative works sheltered by copyright requires mass

distribution, transfers and financial investments for their publicity. This goes

for books, sound recordings and films, to name some. Consequently creators

sell the rights to their works to business actors best able to market the

works in return for payment, such as in the relation between publishers and

authors. These payments are often made conditional on the actual use of the

work in commonly applied royalty agreements.84

The economic rights grants the originator an exclusive right to disposition of

his work in order to enjoy whatever profits the work might give, URL 1st

chapter § 2. The moral rights, ”droit moral”, on the other hand involve the

right to claim authorship of a work and the right to encounter changes to it

that could harm the creator's reputation, URL 1st chapter §3.

There is however an enumeration of exemptions to these exclusive rights,

URL 2nd chapter. This means however no limitation to the rights of the

creator granted in the 1st chapter URL. The purpose of having any

exemptions at all is probably that the public is meant to have the right of

limited access to protected works because it would gain a, for the society,

common interest.85 This catalogue of exemptions is one solution on this

issue; another is the fair use clause in the US Digital Millennium Copyright

Act, which is explained later on.

Due to the WIPO treaties there is a time limit for the granted rights, of 50

years after the creator's death. National law establishes sometimes even

longer time limits as in Sweden, where the limit is set to 70 years, URL 4th

chapter § 43. The limit is assumed to enable both creators and their heirs

financially benefits for a reasonable period of time. Before the first of

January 1995, Sweden had a time limit corresponding to the Bern

Convention but it was adjusted when Sweden became member of the EU.86

The originator or, if the rights have been transferred, the owner of the

82 Koktvedgaard and Levin, page 5983 Koktvedgaard and Levin, page 5984 Look back at chapter 4, Actors85 Koktvedgaard and Levin, page 14586 Sweden has implemented EC directive 93/98/EEC of 29.10.1993, to national law


copyright in a work can carry out certain rights, both administratively and in

the courts. The copyright owner may by inspection of premises get evidence

of production or possession of illegally made goods related to protected

works, URL 7th chapter §§ 56 a-h. The owner may also obtain court orders to

stop such activities, URL § 53 a, as well as seek damages for loss of financial

rewards, URL § 54, and recognition.

Among with the possibilities to get a verdict for infringements on copyright

and to punish lawbreakers by fines or imprisonment, URL § 53, these

possible actions secure the economic rights granted by the copyright.

Finally, during the second half of the 20th century a field of rights related to

copyright has developed rapidly, they are often called neighbouring rights.

The related rights grew up close to copyrighted works, and provide similar

but regularly more limited and of shorter duration than the rights granted

for copyright. These rights are given to performing artists such as actors and

musicians in their performances, producers of sound recordings, on for

example CD’s in their recordings, and broadcasting companies, URL 5th

chapter §§ 45-49a.

The performance is here obviously the primarily safeguarded object and

thereby not of weightier interest to e-book business. (If not the branch can

argue for that the Internet based web site offer and delivery in fact should be

seen as some sort of performance). Except for one type of creation, the

catalogue or database protection, which in Sweden is protected by a separate

rule, URL § 49.87 The database protection means nothing for the plain

product (e-book) but is important for the businesses marketing e-books, as

they have to built up large libraries with designed catalogues to present their

e-books in a both practical and selling manner. There are lot money invested

in such databases, therefore it would be harmful if competitors were allowed

to copy these.

Copyright and Its International Context

If the Swedish Copyright Act meets the demands arising from legal

protection within the territory of the Swedish State, how do international

copyright protection manage this matter in a worldwide perspective?

Copyright has more of international character than most other legal areas

87 Directive No 96/9/EC, copyright protection for databases is implemented to Swedish Law


thanks to the international trade and international conventions, first and

foremost the Bern Convention which was contrived as early as 1886, have

shaped national laws to be much alike. The WIPO organisation has also been

a successful brick in the internationalisation of intellectual property issues.88

WIPO’s task is to administer the immaterial world conventions and to work

for its further developments.

BC’s fundamental principles can be numbered to two. First, there is the

principle of national treatment. This principle means that any citizen

belonging to a member state of the Bern Union, states which has signed the

BC, has the right to protection of intellectual property in accordance to at

least the level of protection given in the home country, in every other

member state.89 Second the principle of minimum protection, which

regulates the grade of IP protection every member state at least must

withhold for citizens of other member states.

The rules on minimum protection and national treatment are also settled in

the WTO-TRIPs charter, from 1994. TRIPs is a coherent IP protective

regulation in a global commercial perspective, which is part of the WTO

system of monitoring international trade issues and supporting litigation

between member states.90 But the TRIPs gives even a wider IP protection

than the BC in that it prescribes a third principle, the one of the most

favoured nation. That is any privilege given to a legal subject of a member

state must in addition be given to legal subjects in all other member states.

Except the WIPO and WTO agreements an interest within EU for the gaining

of harmonisation on the IPR area has lead to a numerous of directives.

Directives are legal acts that obliges the member states to adapt what is

regulated in it so national law is in conformity with the intention of that

directive. This is explained with that a directive is judged to have direct effect

in the member states of EU after that the prescribed period of time within

which the member states must correctly implement the directive has

expired.

The EU is also regulating some fundamental rights with consequences on IP

issues in the Treaty of Rome establishing the union. The non-discrimination

88 WIPO, established 1948, www.wipo.org (20 September 2001)89 Look at the Swedish International Copyright Act § 2-4, (SFS 1994:193)90 U. Bernitz (with co-authors), page 10


contingent on nationality, art 12.1, (compare with the principle of national

treatment in BC), restraint-of-trade practices, art 81 and 82 and the matter

of parallel-import, where a protected good is put on the market by the IP

owner and then forwarded by export by a third party. When an immaterial

right good is sold on the market in a EU member state the IPR concerning

this specific copy is considered exhausted within the territory of EU but not

in a global sense, a principle derived from art 28 and 30, ruled by the court

of the EC.

Sweden is member of the Bern Union and is bound by the TRIPs agreement

both as a member of EU and according to a separate ratification process.

The EU commitment is also obliging Sweden to comply with the Rome Treaty

and the different legal acts of EU. Most of the industrial worlds countries are

in a similar situation, which has the effect that intellectual property is

recognised and regulated very much the same in most parts of the world.

What differs in the International context?

Copyright itself does not depend on official procedures. Compare to what is

stated above according to the Swedish Copyright Act. A created work is

considered protected by copyright as soon as it exists. However, some

countries have a national copyright office which allowing registration of

works for the purposes of, for example, identifying and distinguishing titles

of works, which is the case in the US. Another difference that can be

mentioned is the method of how exemptions to the exclusive rights of

copyright are regulated. In the relatively recent reconstructed US copyright

Act, the Digital Millennium Copyright Act, a possibility is opened to the use

of a copyrighted work, via a fair use clause. Whether the use is fair or not

has to be judged from case to case.

In Europe another method to prescribe exemptions is used. To pick an

example let us return to the Swedish Copyright Act, URL, where the

exemption clauses to copyright is found in the 2nd chapter. The act is issuing

a catalogue of dispositions, which are considered admissible. The catalogue

shall be interpreted as an exhaustive enumeration of exemptions to the

creators right in connection to his or hers IP.

Technological Protection


Is the legal protection enough? No, criminal behaviour has been noticed in

the past and so it will in the future. The fact that there are risks of being

punished before the state-controlled courts in the name of the law does not

scare all members of the society to abidance applicable laws. It does not

matter there is well working bodies administrating the legal tools, both in the

national and in the international perspective.

Technology based protection is probably the most important part of the

system to consider, when selling e-books. The law has geographical and

practical limitations but offers the strength of the state. Agreements are

broken, now and then, but offers possibilities to remedies when an

agreement is violated. The most direct and effective control of the rights

must therefore be given by technology-based protection.

This however often complicates and delimits the use of copyrighted works

and is therefore also a threat to the commercialisation. In this perspective

the e-book business must seriously weigh the pros and cons of the use of

technological copyright protection solutions.

Technology solutions should provide protection against both authorised and

unauthorised users, which has the intention to abuse the system. To meet

these problems, the system must be able of proving any entity’s participation

in an event must be built in and the system must clearly provide adequate

usage control at the risk of such improper usage. The instrument to meet

such use could also be strong authentication mechanisms in the system and

to make sure that the access control mechanisms is sufficiency.

Protective solutions must be implemented so that no unauthorised entity

eavesdropping on an interaction on the content server. Like when a hacker

watching a network session between a customer and a vendor. The system

technology has to have the capability to protect data against modification or

interception during transport and protect personal integrity information.

There is of course a threat coming from potential attacks on the e-reader

device itself in addition to these mentioned. In this case the e-book

entrepreneur has to consider security and weight it to the e-books

practicability and user friendly abilities.

Technology development is not only for the benefit of copyright though, it

also threatens the mere existents of copyright. Because of the almost


unlimited possibilities to copy digitally published works. Can copyright keep

up with these advances in technology?

The field of copyright and related rights has expanded enormously with the

technological progress of the last several decades, which has brought new

ways of spreading creations by such forms of worldwide communication as

satellite broadcast and compact discs. Dissemination of works via the

Internet is but the latest development, which raises new questions

concerning copyright. WIPO is deeply involved in the ongoing international

debate to shape new standards for copyright protection in cyberspace. The

organisation administers the WIPO Copyright Treaty (BC) and the WIPO

Performances and Phonogram Treaty (VC), which has set international

norms aimed at preventing unauthorised access to and use of creative works

on the Internet or other digital networks.

Contractual protection

In the computer world it is common to use licenses for the utilisation of

software. Between the parties in a transaction where digital information,

software, takes place it is common to make arrangements on the use of the

traded goods. This is often given the form of a licensing agreement, where

the customer not actually buys the merchandise, the digital copy, but is

given the right to use it. These agreements are not actually a part of the act

between the vendor and the customer but between the manufacturer (the

copyright owner) and the customer as a user. Agreements of this type are

often called ”EULA”, End User License Agreement.

The construction of such agreements is a method to take control over the

flourishing piracy copying and other infringement acts of today. The

licensing contracts are said to strengthen the copyright protection beyond

the law given guardianship and where the technology fails to cover up.

Besides, the old Roman saying ”pacta sunt servanda” is deeply rooted in our

minds.

What about licenses when it comes to e-books? Is it possible to use the

construction of a so-called shrink/wrap license on a single copy of an e-

book? As there will be no physical copies delivered the thought of a sealed

product is far fetched. The shrink/wrap licence is built upon the concept

that when open up the wrapping one has agreed upon the licence agreement


presented on the convolute or by the vendor and should thereby act in

accordance to this.

Another licence agreement of the EULA kind is presented just before the

installation of a software product as an incorporated part of the installation

process. If not accepting the EULA no installation will be possible. This is

neither an alternative to the e-book vendor, as it would be very impractical to

make an installation of every single e-book bought.

At the Internet a third and nowadays commonly used alternative is to view a

user license before the download process starts. One has to accept with a

mouse click on an ”I Accept-button”. The download of data is made

conditional upon this acceptance. Can a part be bound by an agreement just

by a mouse clicking on an Internet site?

Managing the Copyrights

A publisher can maintain copyrights with great determination. The

instrument for this is provided by the society. It is the copyright law that

supports the business of publishing by giving publishers a mechanism for

limiting pirate markets. By looking after ones interests and meet copyright

infringements aggressively, publishers can prevent the pirating market from

becoming commonly used, hinder pirates to get any large income from IP

content thefts and also prevent technologies and services that enable piracy

from being abused. The copyright owners should as well pursue operators of

web sites distributing pirated content, plus contact the ISP company hosting

these web sites to give them notice about the infringements. Another

instrument can be to establish processes for detecting the distribution of

pirated books on certain web sites. Then send warnings to the site operators

of their infringement, and oppose persistent infringing parties to prevent

distribution channels of illegally copied intellectual property from becoming

large and organised.

As copyright laws provides for the business to protect intellectual property,

an obvious step must be to advocate enforcement of existing copyright laws

both nationally and internationally to prevent individuals and companies

from profiting from low control measurements.

The business can also seek expansion of the protected sphere provided by

copyright law by pursuing legislation authorities to address digital


distribution, and by declare their opinion in any intellectual property forum.

And thereby pursue a legislative agenda to strengthen protection of digitised

literary works distributed in digital form, why not by proclaiming a possible

new performance right in digital distribution.

From above we have also learned that it is most essential not to relay only on

the fact that society by law enforcement has considered copyright worth to

protect, as an intellectual property asset. This protection must be combined

with technological solutions for copyright protection and even in the

relationship with customers by contractual tools delimit the right use of any

sold or user licensed copyrighted material.

Conclusions and copyright policy

Copyright of literary works is maybe about to take one step forward,

strengthened by the construction of computer software shrink/wrap

licenses, new technology for encryption, copy protection and rewritten

copyright laws, which have the ability to protect the copyright in a digital

format. This is critical because if failing to build a strong protection to the

literary creation it will be hard to manage these proprietary rights in this

digital media world.

Copyright law supports the business of publishing by giving the actors a

mechanism for limiting pirate markets. By aggressively upholding their

copyrights, publishers in the e-book business can prevent pirate markets

from becoming convenient to use, prevent pirates from deriving significant

income from pirated content, and prevent technologies and services that

support piracy from being abused. Further on the business should develop

better technologies to protect the copyrighted work and via well-balanced

agreements with the customers exercise an effective control over the

immaterial product flow.

The business can also choose to lobby before governmental authorities for

the development of the copyright laws preferable united, in some interest

groups, which has greater possibilities of succeeding the mission.

Focusing on these facts the authors and publishers can get well off in e-book

business.


5.4.2.2. Patents

Introduction

The patent systems impact on e-book concept industry is not going to be fully

examined hereunder but there is a couple of questions that has to be paid

attention to, so that one are not completely unaware of how it works.

Is it necessary to apply for a patent as an e-reader manufacturer or a

software developer? Why is there a need of patented products and what is

the patent about? I will hereunder try to shortly explain the nature of patent

and the legal patent system providing a protection to the inventor and his

investments so that he alone can, without infringements exploit the

invention.

Where IPR’s generally provide incentives to individuals by offering them

recognition for their creativity and material reward for their marketable

intellectual property the patent system in particular, accommodates strong

motives for innovative efforts. This in turn encourages innovation, which

assures certain industrial progress of society.

When granted patent protection the inventor has to publicly disclose

information on their invention. This increases the body of public knowledge

and promotes further creativity and innovation by others.

We will see what kind of protection the patent offers, as well as the

possibilities to commercialise the patent itself. There is an increasing use of

patent licences to make faster and bigger turnovers. A successful patent

licensing program is dependent on effective patent strategy management and

this issue will be focused at the end of this section. For the publisher

choosing to buy the right of using patented technologies the basics of patent

licensing can be of interest.

Patent protection means that the invention cannot be commercially disposed

without the patent owner's consent. These patent rights can be enforced in a

court, which, in most legal systems, holds the authority to stop patent

infringements. On the contrary, a court can also declare a patent invalid

upon a successful challenge by a third party.

How do the patent legislation in Sweden meet the demands from a

commercial angel?


National Patent Legislation

The first round in trying to obtain protection to an invention is to decide the

patentability of it. As the field of protection has an industrial context, the

invention must be possible to utilise industrially, Swedish Patent Act, PL 1st

§. In addition to this legally expressed demand a more precise definition to

what can be considered an invention is needed. There are three such

specified matters; it must be judged a novelty and show an inventive step,

fall within the technological subject field (prior art) and to have potential of

reproducibility, PL 1st §. These must be considered fundamental

requirements on the invention. In securing a patent is the filing of a patent

application, PL 8th §. The patent application generally contains the title of the

invention, as well as an indication of its technical field. Therewith it must

include the background and a description of the invention, in clear language

and enough detail that a professional of the field with an average

understanding could use or reproduce the invention. Visual materials such

as drawings, plans, or diagrams to better describe the invention usually

accompany such descriptions. The application must also contain various

"claims", that is information that determines the extent of protection granted

by the patent, PL 39th §, compare with PL 8th § 2 paragraph. To get a patent

application granted one has to be the first to file. The priority, which

application will be granted a patent, is set from a day to day basis, PL 2nd §,

which not seems to have caused any practical uncertainty.91 The time limit

for protection of an invention via the patent system is 20 years from the day

of the application, PL 40th §. A granted patent means exclusive right to

disposal of the invention within Sweden if filing according to PL. Or the

designated countries, if filing to a regional or international patent regulation.

A patent is granted by a national patent office, in Sweden that is PRV, or by

a regional office that does the work for a number of countries, such as the

European Patent Office, EPO under the EPC, or the African Regional

Industrial Property Organisation. There is also the WIPO-administered

Patent Co-operation Treaty (PCT) provides for the filing of a single

international patent application which has the same effect as national

applications filed in the designated countries. An applicant seeking

91 Koktvedgaard and Levin, page 211


protection may file one application and request protection in as many

signatory states as needed.

Patent Law in the International Context

Besides EPC and PCT a convention which early focused on the protection of

industrial property in an international perspective was the Paris Convention

of 1883. Besides patents it covers trademarks and design patents (US),

(registered designs, UK and geschmacksmuster, GER).92 Up to date over 130

states have ratified the Paris Convention.

The convention is built on three essential principles. These are jurisdiction

under national legislation only within state territory, where a minimum

protection must be uphold and finally the principle of national treatment, that

is an individual of a convention state should gain a least the same level of

protection in another member state as it’s own citizens.93 The important rule

on convention priority ensures the inventor the possibility to be granted

patents in other countries though the first application in fact brakes the

requirement on novelty, within a period of twelve months. The Paris

Convention does not regulate a procedure to file for a ”world patent”, as a

patent only can be granted in each single country.94 This is where the PCT

has more of practical significance.

Patent strategy management

The management of a company must consider the formation of a patent

policy beforehand. The following questions should be considered. Is it worth

using the patent system? The cost can be high, the application becomes

public, reversed engineering makes it possible for anyone to reproduce the

invention and maybe develop it further. Which countries should be

designated? This is a highly relevant issue

The strategic patent management program should contain:95

1. Efforts to obtain disclosure of inventions. Disclose ideas – cash incentives

and brainstorming groups, cross professional.

2. Review of the disclosed ideas. Review board patents, keep the trade secret

and develop it. This can give the company exclusive rights to the

92 Koktvedgaard and Levin, page 25193 M Koktvedgaard & M Levin, page 3794 M Koktvedgaard & M Levin, page 40


invention without a patent. There is, however a high probability that

someone will know about the idea, sooner or later. Or on the contrary,

disclose to public domain (no other actor will be able to patent it). Issuing

the invention to public domain means that nobody else can apply for a

patent. The way this is done is by publishing an article about the work.

Thereby the requirement of novelty is broken. The two ways to go if not

filing for patent: 1) Keep invention a trade secret or 2) Issue invention to

public domain.

3. Establish a confidentiality program. Confidentiality and non-competition

agreements with all employees should be carried on. A confidentiality

policy should be issued and the company should review and all

publications and speech to public. Further on the company should mark

company papers confidential, to make employees aware of the weight of

keeping eventual secrets within the business.

4 . Establish a licensing program. With an independent profit centre to

manage the immaterial rights. And why not give individuals incentives by

performance compensation in a bonus programme.

5. Establish an enforcement function. To ensure that no infringing is done

by monitoring, policing, initiate opposition proceedings and negotiations

as preferred or maybe litigation initiatives.

6. Avoid infringements of patents of others. Make sure your ideas have

novelty, ask for a written opinion from patent counsels of whether

infringing or not.

7. Monitor patent activity of others. To obtain information on operations of

competitors, and get up to date on technologies.

8. Ensure that title to new developments comes to rest with the company.

Contracts signed by employees should clarify all rights to development

are property of and shall be assigned by the company. This should also go

for third party business associates, including joint-venture partners

suppliers etc.

9. Determine in which foreign jurisdictions counterpart patent applications

will be filed. Aspects as the international perspective of marketing etc.

95 S Glacier, page 5-7


and the geographical markets will have to be designated. The company

might, even though it is small, be acting on the world-market. The cost

for filing patents in many countries may be too high.

Patent licensing96

If the company decides that their patents are to be used in a licensing

program the company must have a patent worth paying for. If it is the

licensing can be very lucrative. Remember though, first user’s rights, don’t

give the right to license an invention.

Here is some issues to consider if going to use the patent as a goods. 1) Write

the claims on clear, plain language. Any investments from others depend on

that they understand the value of the invention. Claims should also be as

wide as possible to make sure that any further development of the usage of

the idea can go under the patent. 2) Price terms on licensing agreement

should be so clear that when the licensee are paying the fee no hesitation

about the amount of it could be possible. 3) Terms on payment have to be

decided likewise in a clear manner: When and how? Subject of offsets,

discounts, returns and change orders should be regulated. Likewise what

constitutes late payment and which remedies will in the case be actualised?

4) Give a clear product definition on what products the licence cover, what

constitutes development and how to share jointly modification etc. 5)

Ownership, developments, know-how R&D joint efforts etc should also be

included. And finally the fundamental issues whether the licenses would be

Exclusive- or non-exclusive licenses has to be carefully thought about.

5.4.2.3. Trademarks

The trademark is a characteristic sign or a combination of letters, which

identifies certain goods or services. The use of trademark origin long back in

time, when craftsmen reproduced their signatures on the artistic or functional

goods they were creating.97 Over the years these marks evolved into the

system of trademark registration and protection we have today.

The system nowadays helps consumers identify and purchase a product or

service because its nature and quality indicated by its unique trademark.

Furthermore it strengthens the commercial value of specified products for

96 In accordance to S Glacier, page 55-6197 M Koktvedgaard and M Levin, page 274


the vendor. The trademark is per definition an intellectual and industrial

property family asset. Therefore trademark issues must be involved from the

start of a new business idea. The general perception of a trademark is

considerable when it comes to give the product attention and distinguished

qualities. And the more commercial information spread in the world the

more importance a strong trademark will have to get to the customers.

The owner of the trademark gets the benefit of protection to the exclusive

right of using it to identify goods or services or to entitle another party to use

it in return for payment, (licensing agreements).

In a wider sense, trademarks encourage initiative and enterprise worldwide

by rewarding the owners of trademarks with recognition and financial profit.

Trademark protection also hinders the efforts of unfair competition, such as

the use of similar distinctive signs to market inferior or different products or

services. The system enables people to produce and market goods and

services in fair conditions, thereby facilitating international trade.

Here is a presentation of the legal view on trademarks. In Sweden the

trademark act, varumärkeslagen (VML), protecting the property of

trademarks, in fact defined as an intellectual property. The property holder

can register a trademark for exclusive right of use, by giving in a trademark

application to the authority that deals with trademark issues, VML 1 §. A

second prospect is to use a trademark, which in time becomes well known

and thereby get the benefit of protection. In Sweden PRV administers the

application and approval process. Trademarks may be registered as one or a

combination of words, letters, and numerals. They may also inhere of

drawings, symbols, three-dimensional signs such as the shape and

packaging of goods, or colours used as distinguishing features, VML 1§. The

application must contain a clear reproduction of the sign filed for

registration. The application must also contain a list of goods or services to

which the sign would apply to, VML 17§. The sign must fulfil certain

conditions in order to be protected as a trademark. It must be distinctive so

that consumers can distinguish98 it as identifying a particular product, as

well as from other trademarks identifying other products, VML 13§. It must

neither mislead nor deceive customers or violate public order or morality and



finally the rights applied for cannot be the same as, or similar to, rights

already granted to another trademark owner, VML 14§.

By registration the holder of a right to a trademark will also gain protection

against unauthorised use of the trademark. Meaning that the holder of the

right can rise claims for economic compensation before the court of justice

and that the misusing part shall be forbidden to use the trademark anymore,

in other words stop the infringing act, 37a and 38 §§. The unauthorised use

is also prosecutable, where the verdict can be to pay fines or if the misuse is

grave, to imprisonment, VML 37 §. The period of protection is 10 years, but a

trademark can be renewed indefinitely beyond the time limit on payment of

additional fees, VML 22§.

In the digital world we have been seeing several conducts of trademark

misuse, especially on the Internet. The main reason for this is that it is not

possible for anyone to have effective control over the information on the

Internet. Another contributing fact is that the WWW and the Internet is

relatively new phenomenons where some users are not aware, and have not

even thought of protective legislation for economic interests connected to the

exclusive right of copyrights, patents, trademarks and firm names. There are

as well the enormous amounts of users and the uncountable sites where

information is given. Sites that not all have the intention of being honest and

fair in their commercial conduct.

We have in the recent past seen individuals and companies registering well-

known trademarks as top-domain names, with some sort of business idea in

mind. Brand names or trademarks followed by for example a dot- ”com”

domain, all in order to make profit of their registration when the owner of

such a brand name was becoming interested of setting up an Internet site.

The property holder became aware of that someone else already had

registered the trademark as a domain name, when handing in an application

for the domain name corresponding to the brand name of his. Then he had

to contact the sort of “infringing” party and pay to get to use the brand name

or trademark as a domain name on the Internet.

The authorities handling the applications of domain names in a country, in

Sweden that is NIC-SE, is not likely to have knowledge about all well-known

trademarks in other countries. Because of among other reasons the

separated marketplaces and language barriers. The applicant can therefore


have an approval of the domain name application.

But there is an ongoing work under the supervising of WIPO to get some

control over the international domain name system.99

WIPO issued in 1999 a resolution, the Uniform Domain Name Dispute

Resolution Policy, that deals with the disputes that concern conflicts

between domain names and trademarks, it deals only with deliberate, bad

faith violations of trademarks in which the domain name holder has no

rights or legitimate interests. Such deliberate, bad faith violation of

trademark rights through the registration and use of domain names is

popularly known as ‘cybersquatting.’100

Another way of an indirect misuse of brand names and trademarks is to

copy them into a so-called ”META tag” within the HTML code, like this:

< META name = "KEYWORDS" content = "brand names, trademarks, firm names" >

The tag is placed in the ”head” section of an HTML document. When a surfer

using a search engine like Altavista.com or Yahoo.com to find more

information about a product, brand name or a firm. The search engine seeks

the HTML documents on the Internet and finds published and registered

WWW pages containing the search word, mentioned in the HTML codes. The

META tag is not visible on the actual Internet site but will give as result that

the site really is connected with the searched words and the site is thereby

listed as one of the search results. This lures the surfer to a site where the

real content can be of totally different subjects than that of interest for the

surfer that did the present search.

Nearly all countries in the world administrate a system for registering and

protection of trademarks. Each national authority maintains a register of

trademarks, which contains full application information on all registrations

and renewals, facilitating examination, search, and potential opposition by

third parties. The effects of such a registration are, however, limited to the

country concerned. The legal system of trademarks seems to fit in badly with

the international scoop of the Internet and the modern IT society. But

instead of registering separately with each national authority, one can now,

despite the above stated, just file for a trademark to one national office in

99 Interim Report of the Second WIPO Internet Domain Name Process, http://wipo2.wipo.int (23-05-01)100 Interim Report of the Second WIPO Internet Domain Name Process, page 8


accordance to a system, which is administrated by WIPO. Of course the state

where an application is filed must be a participant in the system. By this one

can gain an international registration of the mark.

Two treaties govern the system, first the Madrid Agreement concerning the

international registration of marks and second the Madrid Protocol. One

must therefore be aware of that the international scoop of trademark matters

is focused in these treaties. At present, about 60 countries are party to one

or both of the agreements.

The effect of these treaties is in short, that a person who by nationality,

domicile or establishment has connection to a country, which is party to one

or both of these treaties may obtain an international registration good

through all countries of the Madrid Union. This is a special union under

Article 19 of the Paris Convention for the Protection of Industrial Property.

Any state, which is a party to the Paris Convention, may participate in the

work on the Agreement or the Protocol or both

The objectives of the system have two layers. First, it facilitates the obtaining

of protection for trademarks in general. The registration of a mark in the

international register produces, in the states designated by the applicant,

the effects of protection from infringements and exclusive rights of use.

Second, since an international registration is analogues to a group of

national registrations,101 the management of rights issues is made much

easier. There is only one registration to renew and changes in ownership or

in the name or address of the holder or a limitation of the list of goods and

services can be recorded in the international register through one single,

simple procedural step.

5.4.3. Contracting, the International Perspective of the Internet

Contract law is about how we make agreements that are binding. It has a

plain commercial purpose, as it appears to be an instrument for economic

transactions, securing the exchange of merchandises and services for money,

which is more of a direct action.102 But the contract can also be of a permanent

character. In the last case, long term contracts can regulate other legal

relations between parties in an agreement, such as guidelines of conduct or

how to make economic dispositions for the future.



The companies that is going to sell e-books are under influence of contract

law, not only national contract law but as the commerce of the Internet is

highly internationalised, even international contract law. In the perspective

of product- and business structure of the e-book concept, long term

contracts regulating co-operation and use of proprietary rights like patented

technologies and copyrighted material is necessary.

In the market perspective there is as well a question of the direct action,

exchanging goods for money and how marketing is done throughout the

world. How to find a suitable model for this commerce? Clearly contract law

has to be given some consideration when going to start a business.

5.4.3.1. National Contract Law

In Sweden the base legislation on contracting was formed back in 1915, it is

named Avtalslagen, AvtL. This legislation is applicable on the commerce of e-

books but it is a general law on contracting and there are legal works that

more specifically take care of the problems risen from the actual situation,

when goods and services are sold. There are two parallel laws on the matter.

One of them is dealing with the situation where the parties both are

tradesmen or on the other hand they could both be private persons. I refer in

this situation to a law of sale called Köplagen, KöpL. The other legislative

work is aiming at the situation where one of the parties are considered a

consumer, which in most situations are judged to have the need of stronger

legal protection, a sort of consumer-interest law of sale, Konsumentköplagen

(KKöpL). This view on consumer’s rights is shared by a number of states in

the world and is thereby not very surprising.

5.4.3.2. International Contract Law

A few words to be mentioned about commerce in an international

environment. Via the Internet, commerce takes a giant step towards an

economic society without marked boundaries. When a person is online and

visits a site selling e-books, it has no or lesser relevance where the server

containing the site is geographically located. The electronic content of an e-

book is not more difficult to deliver inside the US compared to a deliverance

from the US, overseas to for example Sweden.

102 Axel Adlercreutz, Avtalsrätt 1, page 13.


The international context is obvious and the issue of contract law in this

perspective is not irrelevant. Why do we need contracting rules of

international character? The fact is that when people are doing agreements

they do not always share the same opinion afterwards, of which meaning the

agreement really was stating. If they can not reach a common sense on the

argument there is a requirement of help from the legal system and therewith

the courts of justice. The laws of jurisdiction decide the issue of forum, in

which country a dispute will be resolved. But most consumer transactions

being for smaller sums and it are unlikely that it will be worthwhile to

consider the application of complex rules of jurisdiction.

A couple of issues have to be considered and the starting point for us is the

United Nations Convention on Contracts for the International Sale of Goods,

CISG.103 It is important to have in mind that the rules of CISG are of optional

character, article 6.

To interpret contracts, ingredients like common sense, parties behaviour and

general practice are important, article 8-9. These are familiar interpretation

elements to us as well as the essential freedom in the right of contracting.

Compared to the statements in 3 § of the Swedish KöpL it seems fair enough.

Article 14 sets the conditions of a binding offer, which is in accordance to the

Swedish law.104 There are two main principles of how to make a binding

contract. First as in Sweden the thought is that once issued an offer one are

assumed to have made a promise to fulfil in accordance to that specific offer.

The effect of this approach is that a withdrawal must be done not later than

when the offer reaches the addressee. The other way to look at the situation

is the thought that as long as the addressee has not returned an acceptance

there is no contract reached and therefor the offer can be revoked. The first

principle comes to expression in 7 § Swedish AvtL, the second are received in

the Anglo-American legal system. The two principals are found in article 15

and 16 of CISG. If this is the form of an offer, what is the view on an

acceptance? An expressed explanation or a conduct of acceptance means

there is a binding contract when arriving at the offering party, article 18

CISG. There are also rules of how to judge at the event that acceptance are

altering the terms of the offer, article 19, which can be compared to 6 § AvtL.

103 By UNCITRAL104 A Adlercreutz, page 312


Can those rules be fitted for electronic commerce?

5.4.4. Electronic Commerce

Besides the clear internationalisation of commerce we have seen for a while,

which is affecting contracting, the new electronic communication technology

also influences the contract law in a way that perhaps requires a new

approach when looking at such agreements. This is not a work about

electronic commerce but some issues have to be highlighted as the deliveries

and the payments of e-books are expected to take place over the Internet.

The e-book is a product of the modern IT. And the commerce is going to be

an all-automatic process. This is clearly to define as e-commerce.

Is there at all a need of specialised rules for contracting depending on which

way the parties chooses to communicate? Not generally but we will se that

there are some slight differences. Further on when selling merchandises on-

line one must have two important issues in mind. First that when selling

from an Internet site it becomes a distance delivery, which is regulated in

legislation. Second, as the on-line shops is built up by databases and

information about the customers will be stored in data file registers the on-

line shop owners and staff needs to have knowledge about personal integrity

in the digital environment.

On-line Contracts

Electronic commerce is dealing with transactions in real time, just like if one

where out at the mall shopping. But in this case it is an anonymous on-off

traffic between parties that has never met. Is there a need for Internet

specific legislation or do the legal system have the flexibility needed to be

applicable in this new commercial medium? UNCITRAL has issued the

opinion of functional equivalence. This means that when an IT-system, as

the Internet with connected web-pages handling commerce, serves the same

function as the paper medium the principle rule implicates the same legal

action as if there where a written paper.105 UNCITRAL has with this condition

before hand published a model law, which is interesting in our perspective

but the work is not described here.106

105 C Hultmark, page 21106 UNCITRAL, Model Law on Electronic Commerce, www.un.or.at/uncitral (99-09-20)


Known problems in the electronic commerce and on-line contracts are to

secure what has been agreed on and to identify the participants in the

transaction. A method to identify an actor is to use a digital signature in

accordance to the Public-Key-concept, which consists of two keys, where one

is public and the other private, only accessible for the sender. A third party,

the certification authority, is involved in the verifying process to secure the

identity of the key holder.107 While the different electronic mediums are not

suited as evidence because of their nature, where a copy can not be parted

from the original, one must be cautious to judge these to be of vital

importance.

5.4.4.1. Legal aspects on Marketing

Business actors in most branches have realised that the Internet has great

potential as a media for advertising and marketing. The so-called

webvertising is separated in five broad categories. Advertising in on-line

publications, banner advertising, website advertising incorporating the

advertiser’s brand name, linking a website with an email address and

spamming (the use of mailing lists to send the same message to a great

number of people who did not ask for it).108 Marketing and Competition Laws

suffers from the lack of enforcement power in the international perspective,

though the webvertiser reaches the world at large.

Within the EU work is ongoing to solve the problem to shape an approach

ensuring compliance of laws in the area of commercial communicating,

advertising and marketing.109

In general the EU has recognised the need of harmonisation in the field of

marketing. The Directive on Comparative Advertising110 is an example of

that. But the field as a whole contains lots of issues, like liability for

advertising material, privacy issues for marketing on-line, advertising to

children, telemarketing on the Internet, advertising regulated goods (tobacco,

alcohol), on-line promotions and linking and framing.111

5.4.4.2. Distribution and the Security Measures

107 C Hultmark, page 30108 Michael C and Alistair K, page 179109 Green Paper on Commercial Communications in the Internal Market, May 1996110 EC directive 97/55111 Michael C and Alistair K, page 182 ff


As the need of physical copies are gone because the Internet e-book

publishers or bookstore dealers just deliver a digital file via the Internet,

containing the e-book to be screened at the customers e-reader or computer.

This file can be delivered, or copied, over and over again when it is put on a

server from where the digital copies then are sent throughout the world.

We have seen a couple of different solutions concerning deliverance methods.

The first is to download to a computer and then connect the e-reader to it for

transferring. Another is to download via the e-readers built in modem and

directly access the e-book. A third solution is to download the e-book and

then get a password to the specific copy before viewing is possible. Another

solution may be a kind of streaming technology, where the download is done

trough the computer directly to an e-reader device. The software e-readers

manage downloading of e-book as well.

In order to secure proprietary rights of the content publisher’s uses different

technologies. Adobe and Microsoft’s methods is much alike while Gemstar’s

two RCA models uses a registration procedure for the e-reader making it

impossible to read the encrypted e-book copy delivered on any other than the

specified e-reader.

E-book companies wants of course to offer titles to as many platforms as

possible but it shows to be tricky as publishers before they agree to enter the

market, demands a tight security system like the one Gemstar offers. These

systems are certainly not for the benefit of the buyers. It only sees to bring

the most out of the commercial act for the vendor.

5.4.4.3. Consumer protection

The all automated process of e-book commerce and the international

character turns the consumer protection issues in front. A couple of matters

are considered in this section. First a brief look at the privacy on the

Internet, second an explanation on what rules are specific to distance

merchandising.

In a survey published in the journal Business Week, privacy was identified

as the most important concern for consumers with regard to their use of the

Internet. The publishing industry must be aware of this when exploring new

distribution channels and technologies for doing business, like the e-book.


Consumer privacy protection is very important, as protecting the intellectual

property, therefor are the rules on the area described hereunder.

In Sweden the Personuppgiftslagen, PUL, protects integrity/privacy. The law

is built on the EC directive 95/46/EC of the European Parliament and of the

Council of 24 October 1995 on the protection of individuals with regard to

the processing of personal data and on the free movement of such data. The

aim is to protect people against any violation to his or hers privacy, under

processing of personal data, 1 § PUL. Personal data is all information that

direct or indirect can be referring to a private person, who is alive. 112 In the

10 § PUL, the basic principles for processing of data is listed. If the data

concerned contains susceptible information the processing must be in

accordance to 13-22 §§.

Is there any possibility to carry on an online e-book store and at the same

time meet up with the demands from this legislation? An interesting solution

can be the Identity Protector, which is not fully worked out.113

The other issue is the one of distance selling. In Sweden the

Hemförsäljningslagen meet the demand of implementation form European

Parliament/Council, Distance Selling Directive 97/7/EC. The law aims at

protection of consumer against the risks with buying goods at a distance.

There are five basic regulated matters: A demand of information on contract

and terms, a right of withdrawal, the suppliers obligations, payment by card

and inertia selling. The demand on information is among other some of the

more important, as follows: Identity of the supplier, description of the goods

and services, the price including taxes and delivery costs, arrangements for

payment and information on the right to withdrawal.114

The directive is primarily focused on the electronic commerce. The directive

is not dealing with issues on jurisdiction.

5.5. Business Performance

5.5.1. Introduction

What type of enterprise is expected to start up as e-book publisher? Which

co-operation is needed? What contracting has to be done? Is e-book

publishing just for the already established publishers and dealers of

112 SOU 1998:111, page 120113 M Chissick, A Kelman, page 176f.


ordinary hard- and paperback books? Or do they not have any interest in

this new market? Though publishers are considering requests from e-reader

manufacturers and e-book publishers who wish to distribute the publishing

industry’s intellectual property works digitally, but if the publishers do not

take proper action they could fail to make a good business opportunity come

true.

Publishers have two ways to proceed I think. 1) Sell the right to publish

electronic editions of literary works they posses the rights to or, 2) involve

themselves in electronic publishing. In any case matters of copyright

protection has to be reasonably solved.

What if the publisher decides to sell electronic publishing rights? Then

contractual issues and delimitation of these rights must be highlighted.

What if the publisher chooses to go for electronic publishing? Then he has to

make up his mind about the Text format he prefers, in aesthetically and

marketability views. And then initiate a co-operation with an e-reader

manufacturer with the demanded profile on their product. It is not realistic

that a publisher would start to develop and manufacture a device on his or

her own. But some thoughts the business actors must give the e-commerce

system, which are the source of income.

Risks of Internet Trade

With the unique marketplace Internet provides one has to consider any risks

in the process of marketing and sales. Technology must eliminate any

threats or else the business will face serious problems of operating. These

security issues are related to the distribution of digital content over open

networks, which in fact are shared by most actors providing intellectual

property over such a channel. The solutions for the storing and distributing

of content are similar whether the product is music, film or books. There is

the distribution from central repositories, which can be an Internet

connected server. The content must be protected during transmission over

the network, which could be done by encrypted and validated content and

last the security when the product is in the hands of the consumer, which all

supports the work against any formation of pirate markets.

114 M Chissick, A Kelman, page 26


Another uncertainty is the possibility for a user to circumvent the system.

This could be a hacker bypassing the security of the system by breaking into

the system. For example circumventing the security by exploiting any

vulnerability in the platform on which the system is based, like on the OS of

the server on which the e-commerce system is hosted.

To meet the problems descending from users abusing the business system,

the ability of proving any entity’s participation in an event must be built in.

The system must clearly provide adequate usage control at the risk of such

improper usage.

The threat from unauthorised users abusing the system is a reality. The

instrument to meet such use could be strong authentication mechanisms in

the system and if the access control mechanisms is sufficiency. When

judging about the strength against unauthorised access control the

technology must be in focus. Then there is of course the threat coming from

potential attacks on the e-reader device itself.

The last risk exemplified here is when an unauthorised entity eavesdropping

on an interaction. Like when a hacker watching a network session between a

customer and a vendor. Is the system capable to protect data against

modification or interception during transport is the question that has to be

met with a positive answer.

5.5.2. Economic aspects on information related goods

The trade in intellectual property has highly interesting economics. High

production costs but low reproduction costs. Normally, intellectual property

is expensive to produce. The costs originates in the time and effort that the

author and the publisher put into researching, writing, improving and

developing the work, if taking the e-book as an example. There are also

expenses involved in marketing the work to make it known to the market

target groups, even though these costs are not specific to intellectual

property. The market for illegal copies depends, in fact, on how successful

the publisher has been in creating a demand for the work, by marketing

efforts.

Publishers must therefore be able to recover their costs and make profit by

selling subsequent copies of the work. It takes advanced and serious


calculations of how many copies of the work one can assume to be sold,

before one can start up production and marketing of the work.

In a historical perspective the publishing industry developed in an

environment where the cost not only of producing but of reproducing also

was relatively high. It took investments in printing facilities, well-organised

distribution links, material supplies and a working capital not. Publishers

could before the digital era take advantage from that it was not only

impractical and costly for individuals to publish their own works but also for

consumers to make their own reproductions.

The industrial revolution gave birth to a need of protection for ideas. Ideas

that where commercialised and mass-produced. These products where easily

copied and produced at any competitors facilities. The creator was then

experiencing difficulties to sell his product and a hard time to regain his

investment costs. Society as a whole, I believe, recognised therefore that, in

some cases, economics of producing intellectual property was hindering, as a

negative incentive, authors from sharing their IP with others. This resulted

in protective solutions familiar to us. We now have mechanisms as

copyrights, trademarks and patents to encourage the flow of ideas. By

providing inventors and authors a degree of legal protection, the thought is

to give the creator greater possibilities to earn money when issuing their IP

in public, rather than keeping it secret.

For written works cost of reproduction is still relatively high because they are

sold as physical property. Books have a per-unit cost of production. But so

far they have been preferred because of that the physical artifact of the book

is so well designed and convenient to use. For extended reading, there is still

no substitute for a professionally bound, traditional book. So where does the

e-book fit in?

When the Internet is really widespread and consumers will judge e-books are

equal to or better than traditional books in reading experience, the

economics of the publishing business will change fundamentally, as stated

earlier in the work. Internet provides a distribution channel and the

intellectual property work is uploaded to a server and exposed in an on-line

bookstore, at that point, the marginal cost of reproducing books will

effectively drop to nearly nothing.


There are a couple of important notes to make from this change. First,

anyone can produce and sell books of their own, since there is no longer an

economic or practical question as it was concerning the traditional

publishing industry, because the digital publishing is done without printing

facilities, distributors, material suppliers etc. Second, anyone can take a

book they have, reproduce it perfectly, and distribute it as widely as they

like. This might also be an explanation to why the copyright issues are so

important for the e-book business.

5.5.3. Ideas of e-Book Business Action Strategies

Down to the bottom line, for the business actors it is all about making

money. Is it possible to gain profits from digitally published content delivered

via the Internet? Publishers seem to be of that opinion but only if they can

control every copy that are sold. Therefore they are desirous to the thought

of upholding the flat-price, pay-per-copy business model. Every copy sold

has to give a preferred income. This can be done in several ways. One

solution is to restore the factors that makes the traditional book lesser

lucrative for pirates, which are the impracticability and the high cost for

individuals of producing or reproducing books.

The branch parties seems to be concerned that e-book systems can provide

secure technology that prevents consumers from making copies of electronic

books, because secured e-book systems, like the original NuvoMedia

concept, artificially increase the cost of reproducing the e-book. Intuitively,

this should allow the current business model to proceed unchanged, but

without many of the cost bearers, the need of consolidation and reallocation

of supply chains.115

The costs of developing a closed proprietary system has to be balanced

against the risk of losing money on an open solution, where the copy

protection is not that good. The business actor must decide if the closed

model or any open solution is to prefer. There are solutions representing

both sides available.

It is not only the production and reproduction cost that decides the turnover.

In addition there are other costs associated with trading books that are not

as easily quantified, the costs of transaction. Transaction costs are defined as

115 E-Book Security Assessment: General Report from the Global Integrity Corporation, 1999


costs in time and effort that buyers and sellers come down with in order to

conduct a transaction.

The following types can be identified116: Search, information, bargaining,

decision, policing and enforcement costs. These are found when looking at

the purchasing act from where a need is established to a fulfilled

transaction. Search cost is in terms of buyer-seller relation, how they find

each other on the market. Information cost would be for buyers, learning

about products and judging their quality and for sellers, learning about the

needs of buyers. Bargain and decision costs can be described as arising

when buyers and sellers negotiating the terms of sale respective costs for

buyers comparing the terms offered by various sellers, while sellers has to

decide whether or not to sell to the actual buyer.

Policing costs is defined as costs for buyers and sellers to take steps to

ensure that the terms of sale are fulfilled, while enforcement costs is faced

by buyers and sellers ensuring that unsatisfied terms are remedied.

Even if the financial cost of a book is nothing, as in the case of pirating, the

consumer still has to face some cost in order to acquire the book. This opens

for yet another source of leverage for protecting the publishers business.

Eliminating the Pirate Market

Comprehensive responses to the change in publishing economics will

therefore take into consideration both production/reproduction costs and

the transaction cost. From these factors, we can conclude the following goals

for e-book business to meet with the possibilities of making IP-theft and

piracy lesser profitable. These are to minimise cost of producing, copying

and distributing legitimate copies of an e-book and lower the effort required

to find, purchase, and use legitimate copies of books to a minimum. On the

opposite the goal must be to maximise the cost of pirating, copying and

distributing e-books, which is pirated and increase the efforts to find and

obtain the use of illegitimate copies to an optimum.

There are three key tools for achieving these goals. First, publishers can

exploit on their existing market position. Second, they can take steps to

116 L. Downes and C. Mui, page 108


maximise the benefit of copyright law. Finally, they can anticipate the

changed market dynamics and therewith make proper preparations.117

Publishers still have strength that derives from their existing market position

in the short term. Their position can now be used to protect their long-term

business. For example, publishers currently control the majority of the

written intellectual property sold in the popular markets. Publishers have

therefore an opportunity to set certain conditions to be met before they

release their content for digital purposes. Since the current demand for

digital copies of books also is relatively weak, there has been little incentive

for people to digitally pirate books. As a result, it is still relatively

inconvenient to create a digital copy of a book. If the demand increased,

there might be incentive to improve book-scanning technology or to provide

convenient access to typing services.

The market actors should absolutely take steps to avoid building a demand

for these kinds of products and services in order to keep their market

position. If this is the goal, which are the means?

First the parties at the market can develop and settle a minimum of security

requirements, such as to encryption strength, the use of hardware security

tools, network architectures safety level and to prevent the use of pirated e-

books. These among other measures have to be met before content will be

released to a platform for e-books. Further on one can develop policies for

customer care, which includes refund policies, customer support, user

experience and integrity measurements to be met before a vendor’s e-book

system is allowed to comprise the proprietary works.

The business can also support the work on existing technology

standardisation and take initiatives to further efforts benefiting both vendors

consumers. Standardisation issues have though been presented earlier in

this work. If the demands of e-books at the moment are weak, business

actors have nevertheless to minimise the risk that they will be unprepared to

meet consumer demand when rising. It will do with preparation on products,

implementing an infrastructure for distribution and evaluating technology

solutions, etc. As for the whole dotcom sector development of secure

distribution technologies, such as digital water marking and copyright

117 E-Book Security Assessment: General Report from the Global Integrity Corporation, 1999


management and to promote their incorporation into the product line and in

the distribution systems is essential at the risk of losing control over the

intellectual property. These steps must be considered helpful for publishers

in their efforts to keep their existing market position.

Preparation for Tomorrows Market

Finally a strategy of preventing a flourishing pirate market must include a

schematic preparation for tomorrow’s market. In the long run, one simple

question arises: Is the legitimate obtained e-book priced so that the loss from

illegally sold copies can be reduced to nearly nothing? We have discussed the

lowered transaction costs of selling/buying an e-book, how to justify the

pricing? As a result, any decrease in the transaction costs of the legitimate

market should translate into increased revenue for publishers. Recognising

this, publishers can benefit, both individually and as a group, by reducing

the consumer’s time and effort in buying their books. Is this to be judged

fair, or with this fact in mind and in the presence of pirated books, is it not

impossible to withhold a price near the traditional edition of the book?

Further preparative action can include the pursuing of the wide spread use

of digital object identifiers. DOI is a technology that allows consumers to

obtain the authorised source for a book from its identity rather than by

tracking down its location. I have earlier discussed the importance of

registered trademarks and brand names. It is at any time probably a good

idea to build brand awareness. This would help consumers find publishers

and their books. Consumers will then come directly to the brand for needs

that match that specific trademark's identity. This should be combined with

efforts to increase accessibility of e-book devices, through retail outlets.

This section has given some ideas of how to delimit the risks of a

commercialisation of digitally published content in the form of e-books.

There are for sure a lot more relevant actions that can be done but in a

paper like this, once again, you must priority and weight issues versus each

other.

6. Summary

One of the great dilemmas of modern IT products is, as we now know, the

rapidly changing technology environment. When a product is formed and

ready for the market it won’t be long before newer and better models are


launched. The technology development is not only for the benefit of IT

products, it has also become one of the most unexpected enemies. A product

can be outmoded in so short time that a commercialisation of it has become

not just a great opportunity but also a risk one should not underestimate.

In this essay the intellectual property and the standardisation work has been

set in focus, simply because the protection of investments is a necessary tool

in the economic perspective and likewise is a common standard for product

concepts like the E-book vital when commercialising the idea. As we have

seen there is also a point in recognising the conflict descended from the

relation between IPR’s and standards.

Electronic publishing has the purpose to visualise texts written by a great

variety of authors for an even more heterogeneous group of readers. Authors

want to make their works available and readers got to know that they could

load the literature they want into the e-reader device they own, or else they

would not buy it. We are now aware of the initial failure of the dedicated e-

readers, and with them the proprietary rights issues of the closed systems

has fainted. On the contrary open solutions with reading from a desktop, a

PDA or a portable computer is considered to boost the e-reading market. In

this environment standardisation issues is easier managed. This is also what

has happened in Sweden. We have described a joint and open project, which

has opened the e-book market for all publishers whom want to participate.

Standardisation of what use then, one might ask, when a product will be

replaced of another soon enough. Well, even if the products will be replaced

a common standard is to prefer, as the new products coming up will then

almost for sure be compatible with the earlier set standards.

Even with the diversity of supporting electronic software functions, e-books

makes at least me appreciate the traditional form of a printed book. It offers

more than just words on a page; the traditional book presents a layout,

which gives you a position on the page and in the book structure that helps

you understand the context. Furthermore the paper pages provide an

efficient form of random access, especially when skimming trough a book for

some specific content.

It is my opinion that the e-reader device is a niche market product which

success is very much dependent on pricing and availability. In a couple of


years there will be potent portable devices with flexible display solutions,

which easily manages to incorporate the e-reader function as well. Why then

carry two or more electronic gadgets. The pricing is important in that the e-

reader has to compete with all sorts of integrated technology platforms. Right

now there are only two distributors of e-readers Gemstar and Franklin.

Other developers and manufacturers have withdrawn, as they did not judge

the current technology solutions competitive enough.

The focus has moved from the concept early e-book intercessors adapted, to

the digital editions of books. We have been seeing open model solutions for

e-reading from Microsoft and Adobe. These companies support the idea of

reading on-screen but the device itself has lesser importance in their mind

naturally, as the two companies are software-oriented and pleads for their e-

book reader software. One can read from a PC or a PDA as well as a web pad

or an e-reader. The reading experience is however loosing the charm on

these solutions, I say. Low prices though will possibly give incitement for

more people, who are not interested in, or could not afford to buy the latest

highly priced electronic devices, to buy e-readers just to read e-books from.

The other mentioned important quality, availability, contains of two matters.

First, the e-reader has to be easy to handle with a user-friendly interface.

Second, the e-books must be easy to find and buy. In other words there has

to be large libraries of various content likewise libraries with more specific,

non-fiction literature accessible from home. These libraries must have fast

and effective search engines supporting the customer. And the subsequent

purchase process has to be well working to the extent of speed and security

measures as well. Nevertheless the e-book concept is not to refuse just

because of these reasons. The Idea has an immense bearing and my opinion

is that it will be, in some way or another, part of the future IT-society. But

the E-book as we know it by this work is just not, I think, competitive

neither to threaten the traditional book publishing industry and nor to

attract potential readers. The screen technology is and has been the most

critical point.

I am willing to accept the idea of an e-reader with the two-page spread layout

when open. Thin flexible screens, using for example one of the earlier

described technologies, e-paper or e-ink (if development succeeds). The

reader must feel comfortable before the reading situation. The screen does


not need to conclude all of the electronics. It could be manoeuvred wireless

from a control unit (communication via blue-tooth technology) situated on

the desk, beside the bed or in the belt on your trousers, when out. This

means lesser weight and I believe, better reading experience.

Along with the e-reader the e-books will evolve as well. When the text

becomes electronic, all sorts of things become possible. Illustrations can be

animated to explain a complex process or simply to surprise the reader and

the author may greet you in a video clip when you open the book or maybe

we will be able to watch movies between two covers. But then it will no

longer be about reading, more of experiencing the digital world in a modern

manner! (Compare to the ideas of eBookman reader from Franklin)118. My

guess is that it takes something like this to a successful commercialisation.

One thing is sure:

”Just as Johannes Gutenberg and other early printers struggled to develop

the right technologies during the incunabula of mechanical printing in the

15th century, we can be certain that entrepreneurs and innovators in this

incunabula of digital publishing will develop the right technologies for e-

books and periodicals”.119

It is just a matter of time…

118 http://www.franklin.com, (11 August 2001)119 Roger Fidler of Kent State University at: http://www.jmc.kent.edu/futureprint, 5 January 2000.


http://www.wipo.org/http://www.ecommerce.wipo.inthttp://www.wipo2.wipo.inthttp://www.loc.gov/copyrighthttp://www.publishers.org/http://www.librius.comhttp://www.gemstar.comhttp://www.peanutpress.comhttp://www.mobipocket.comhttp://www.palm.comhttp://www.bn.comhttp://www.adlibris.sehttp://www.bol.sehttp://www.adobe.com/epaper/http://www.microsoft.com/reader/http://www.franklin.comhttp://www.itic.orghttp://www.nicts.orghttp://www.sis.sehttp://www.its.sehttp://www.nic-se.se

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Offentligtryck?Proposition 1998/99:11 Ny skyddsåtgärd vid immaterialrättsintrångSOU 1996:40 Elektronisk dokumenthanteringSOU 1997:39 Integritet Offentlighet InformationsteknikSOU 1997:49 Grundlagsskydd för nya medierSOU 1998:111 E-plikt – att säkra det elektroniska kulturarvetDs 1998:14 Digitala signaturer – en teknisk och juridisk översiktDs 1998:24 Ny skyddsåtgärd vid immaterialrättsintrång

WWW page sourceshttp://www.knowbetter.comhttp://www.thomson-multimedia.comhttp://www.rca.comhttp://www.nvisiontec.com/http://www.nuvomedia.comhttp://www.softbookpress.comhttp://www.elib.sehttp://www.glassbook.comhttp://www.microopticalcorp.comhttp://www.everybook.nethttp://www.promonet.comhttp://www.eink.comhttp://www.cirrus.comhttp://www.maverickaudio.comhttp://www.ebooknet.comhttp://www.wto.org/english/http://europa.eu.int/comm/internal_market/en/http://www.powells.comhttp://www.nist.orghttp://www.ebooks.comhttp://www.iso.ch

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